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Alternative Market Briefing

Outflows from fund of funds continue unabated

Wednesday, June 26, 2013

amb
Peter Laurelli
Bailey McCann, Opalesque New York:

Redemptions from fund of funds continue to be elevated and have persisted for eight quarters raising questions about the long term viability of the structure, as institutions and other investors find they have the qualifications to invest in alternatives directly. According to the latest fund of funds data from eVestment, fewer and fewer investors see the value of fund of funds.

"It really continues to surprise me that people are still curious about the lag in hedge fund industry top line growth when the historical largest single investor in hedge funds - fund of funds - is going through a massive trend shift," says Peter Laurelli, VP and head of industry research, eVestment in an interview with Opalesque.

According to the report data, funds of hedge funds were up 4.05% YTD through April in aggregate, slightly worse than the 4.46% posted by the hedge fund industry. On an absolute basis, both underperformed the S&P 500 for the period, up 12.02%.

Assets under management are growing, although they are growing from performance, not new allocations. Total estimated AUM in pooled fund of hedge funds was USD 882.8bn at the end of May 2013 - a USD 2.3bn increase for the year so far. That figure will likely dip following the recent sell off in equities markets. Investors redeemed an estimated USD 25.2bn from fund of funds vehicles in Q1.

Laurelli expects that the outfl......................

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