Funds Of Funds Lose $300B In ‘08

Mar 10 2009 | 12:28pm ET

The fund of hedge funds industry fared no better than their underlying counterparts last year. Funds of funds lost almost 30% of their assets in 2008, with the industry dropping below $1 trillion in assets under management, according to a new report.

Funds of funds lost $300 billion in assets last year according to the InvestHedge Billion Dollar Club survey. The losses were consistent with those suffered by single-manager funds, and funds of funds continue to account for roughly half of assets managed by the global hedge fund industry.

The namesake hedge funds of the survey—the 137 firms with more than $1 billion in assets—now manage a combined $744 billion. Twenty-seven firms that managed more than $1 billion in 2007 either closed or fell into the hoi polloi by losing assets last year; 14 joined the club.

“The industry has taken a serious beating but it is not an industry that is on the brink of extinction,” Niki Natarajan, editor of InvestHedge, said. “What has happened is that the barriers to entry have finally gone up and only those that are serious representatives of the funds of funds industry will win the institutional money.”

“This clear-out was necessary as there were too many sloppy practices in the industry. Everyone, large or small, good or bad, will be going back to the drawing board to make sure that their business can stand the highest level of scrutiny.”

UBS Global Asset Management A&Q is the largest fund of funds manager with $34 billion in assets, followed by Union Bancaire Privée at $33 billion. HSBC Alternative Investments manages $31.88 billion, Permal Investment Management $24.4 million and Blackstone Alternative Asset Management $23.65 billion.


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