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Alternative Market Briefing

Citi Transaction Services responds to struggling fund of funds model with fund of one

Thursday, December 20, 2012

Peter Hill
Bailey McCann, Opalesque New York:

Since 2008, fund of funds have had a hard time justifying their existence in the wake of less than stellar returns. Now, Citi Transaction Services and several of its fund of fund clients have developed a fund of one model – essentially fund of funds light. Unlike the traditional fund of fund structure, the fund of one sits as a half step between fund of funds and separately managed accounts.

Investors in the fund of one model get much of the same control that they would through a separately managed account approach in terms of customization options, coupled with the due diligence and infrastructure support common to fund of funds. To explain their approach, Peter Hill, Global Head of Fund of Hedge Fund Services at Citi and John Mackin, Global Head of Marketing and Business Development at Protégé Partners, shared their experience at an event for media held Tuesday in New York.

"Funds of hedge funds are at an inflection point," Mackin said. Protégé Partners was founded in 2002, and Makin says plainly that taken together, the fees and lukewarm returns in the fund of funds space has been hard for investors to swallow since 2008.

In recent years, separately managed accounts have seen increasing popularity as institutions, family offices and even high net worth individuals use the structure as a means of test driving managers or strategies before going all in. However, separately managed accounts come with a signi......................

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