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Alternative Market Briefing

Hedge fund providers not ready to count fund of funds out of the game

Wednesday, September 22, 2010

From Kirsten Bischoff, Opalesque New York:

There were 54 closures of fund of hedge funds (FoHF) during the second quarter of 2010 according to Hedge Fund Research (Source). While this number remains too large for comfort (it works out to approximately 4 liquidations per week), the slowing pace offers a hint of relief compared to the overall number of FoHF (800) that have vanished in the past two years.

"Hedge funds need fund of funds," says Don Steinbrugge Managing Partner at marketing firm Agecroft Partners. "Fund of funds tend to be strong investors into small and mid-sized hedge funds, whereas many other large, institutional investors at this point are still flocking to the biggest, most established names."

While multiple voices continue to sound the death knell for FoHF, the slowdown of liquidations may indicate that this area of the market is finally stabilizing. In fact, out of the 800 number floated by HFR, only 500 of those FoHFs that have disappeared have been liquidations - the rest may be attributed to mergers and acquisitions as the industry contracted (a trend seen all across the asset management industry).

"There was a downturn with fund of funds since 2008, but from our standpoint we d......................

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