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Alternative Market Briefing

Funds of hedge funds started to compete with hedge fund managers

Monday, October 13, 2014

Komfie Manalo, Opalesque Asia:

A white paper released by hedge fund research firm Infovest21 says the relationships between funds of funds and hedge fund managers, funds of funds and consultants, and funds of funds and institutions are changing.

In the paper entitled, "The New Breed of Funds of Fund," Infovest21 said some funds of funds have started to compete against hedge fund managers. The trends can be seen at all levels including specialized products, like for example macro credit.

The trend has implications for funds of funds acting as a strategic partner and going further up the value chain, potentially even including direct hedging and adding overlays. Some funds of funds are putting on direct trades, others bring managers on an internal platforms, the paper said.

Co-investment: Opportunities and stumbling blocks

Lois Peltz, president of Infovest21 and author of the report, commented, "More funds of funds are exploring co-investment opportunities but not many have developed a real expertise in the area. Co-investing is a difficult thing to do. A large staff is needed and it tends to focus on illiquid investments. Potential conflicts of interest are another stumbling block. Another reason for the slow pace of hedge fund co-investment is that hedge funds only started to get into co-investments following the 2008 financial crisis."

How many will copy Blackstone......................

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