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Don Steinbrugge From Kirsten Bischoff, Opalesque New York:
Since January 2009, the performance of large fund of hedge funds (FoHFs) has tracked alongside that of large, single strategy hedge funds (according to HFN's Fund of hedge funds strategy report for December 2010). This is due to the fact that those FoHFs that survived the 2008/2009 market crisis were then additionally hampered by lingering liquidity issues and industry wide concern over lack of due diligence that allowed multiple frauds to rock the industry. These funds have since been funneling returning assets into the "safe bets" of large, big name funds, many of which allowed access for the first time in years following the 2008 market downturn. However, as FoHFs lag overall hedge fund performance (by nearly 400bps YTD as of end of October 2010), it is likely more institutional investors will look outside of the big names, and give niche FoHFs a chance to compete for assets.
"As large institutional investors continue to increase their knowledge of alternative investments, they will begin to utilize a 'hub and spoke' approach to FoHF investing. This approach involves a hub investment in one of the largest hedge fund of funds as the core hedge fund allocation, and spokes made up of niche FoHFs that either focus on small to mid-sized managers or specific strategies," predicts Don Steinbrugge, Chairman of hedge fund service provider A...................... To view our full article Click here
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