Funds of funds industry shrinks by USD95bn in first half

Date: Tuesday, September 8, 2009
Author: Hedgeweek.com

The funds of hedge funds industry shrank a further 13.5 per cent in the first half of 2009, with the previous freefall broken by relatively strong positive performance of 5.12 per cent to the end of July, according to a survey of the InvestHedge Billion Dollar Club.

The largest funds of funds-those with more than USD1bn in assets under management - now control a combined amount of USD613bn in assets, according to the six-monthly 2009 asset flow survey carried out by InvestHedge.

For the first time, however, this number has been added to the assets of all the many other non-InvestHedge Billion Club members also in the InvestHedge Database to produce a total of USD735bn, the first definitive total figure for the global funds of hedge funds industry.

If the global hedge fund industry is estimated at close to USD1.7trn in total assets then funds of funds still allocate about 40 per cent of that total.

'A lithe funds of funds industry is rebounding from the crises of the last 18 months,' says Niki Natarajan, editor of InvestHedge. 'It is leaner, fitter and only those that have shown themselves to have managed the different challenges with a defined, repeatable and explainable process are set to survive and win the institutional money that is certain to come back.

'The industry is in the process of re-emerging as the tool of choice for investors to allocate assets to absolute returns funds according to their guidelines, time frames and liabilities. The re-born industry will be more in line with investors.'

There are now 117 funds of hedge fund management companies in the InvestHedge Billion Dollar Club, with 18 leaving the rankings in the first six months of 2009. Over the last 18 months since the start of the sub-prime mortgage crisis, some 48 groups fell out of the rankings after shutting their businesses or the assets falling below the USD1bn level. Over 18 months, the industry lost nearly 40 per cent of its assets, equivalent to nearly USD400bn.

UBS Global Asset Management A&Q with total assets of USD31bn retained the top slot in the rankings. If the assets of UBS Wealth Management USA are added in, UBS has a total of USD33.3bn, making it the largest fund of fund management group in the world.

With USD26.4bn, Man Investments is now the second largest, having formally combined the assets of its RMF Investment Management, Glenwood Capital Investments and Man Global Strategies units.

Blackstone Alternative Asset Management has jumped to third place with USD25bn in assets.