The future of FoHFs lies in the numbers

Date: Friday, March 4, 2011
Author: Niki Natarajan, Hedge Fund Intelligence

Stop press: funds of funds are back

The story of 2010 was a story of assets; recovery of performance; and recovery of self confidence. Not only have the best survived the tests of the last few years, but there are already cracks appearing in DIY portfolios. The masses who stampeded towards direct investing should just read the Institutional Letter on page 13.

As the results of the 10th annual InvestHedge Billion Dollar FoHF Survey show (see page 30), with the top 109 FoHF firms now managing $625 billion – with the asset growth of 4.82% mirroring the performance of 2010 – it is clear that the haemorrhaging of assets has finally stopped.

So what next for an industry that seems to be constantly under fire from the press, from many of the managers in which it invests and from the investors that cyclically believe that can do it better themselves?

According to numerology, which looks at the power behind numbers, 31 December 2010 distills to the number 10, which in turn is 1+0=1.

One is also behind the 10th annual survey and the fact that there are 109 firms in the latest ranking (1+0+9=10). So what is the number one about? One is about ignition: the birth of a pioneering journey, or cycle, the first step into new possibilities.

Number one is full of ambitious energy and the number of action and new growth. So where is this industry all set to grow, or be going? Maybe the answer is held in the number nine.

In conjunction with the Ninth Annual InvestHedge FoHF Awards, being held in New York next week, InvestHedge is hosting the Global FoHF Forum to discuss The Future Face of Funds of Funds.

In numerology, the number nine represents the completion of a cycle and the dispensation of the knowledge, wisdom and experience acquired in the journey. Nine is effectively the teacher speaking.

So what could be more fitting than hearing from speakers from firms such as Permal, Aurora, Morgan Stanley and LCF Rothschild, many of whom have been in the funds of funds industry for much more than 10 years?

In fact, not only are Aurora and Permal nominated in the 10 Year performance category but Roxanne Martino and her team have been running Aurora for 22 years. The number 22 is known as a master number; it is a number about building dreams and great new structures. If this is the case, then we can expect great vision from Roxanne’s experience.

In its numerological year four, Aurora, like the FoHF industry with its $625 billion in assets (6+2+5=13=1+3=4), and the editor of InvestHedge, is focused on discipline and consolidation.

But perhaps even more interesting is the number behind $21.6 billion Permal, a firm founded in 1973 that has been nominated for one or more InvestHedge awards every single year since the inception of the event in March 2003.

All ears will be on Josh Levine at the Global Fund Forum to find out what it is that Permal has done and clearly continues to do, to remain at the top of its game.

With five nominations for 2010 performance and asset growth of 11.34%, what is on the agenda for this 37-year-old firm? Like the industry, Permal (37=3+7=10=1+0=1) is at the start of its journey taking the first steps into new possibilities: UCITS, managed accounts, China and more.

If nine means the teacher speaks, then the Global FoHF Forum will be the first time that some of the best brains in the industry share their views, dreams, concerns and ambitions. Questions on everyone’s mind will be discussed, ranging from whether consultants are friends or foes to FoHFs and can emerging managers add value or do they simply increase the risks?

Until now few funds of funds have wanted to share their secrets. But as any cook will know, even if someone knows the basic ingredients, every cook’s masterpiece will be different – as long as with the paprika there is passion and purpose! Maybe the time has come to say, “I’ll have what she is having”.