Assets in Hedge Funds of Funds continue to grow in 2005

Date: Tuesday, February 21, 2006

Assets continued to flow into the largest fund of hedge fund groups at a rate of 12% for 2005, despite widespread pessimism that asset flow trends were likely to reverse, according the latest survey of the InvestHedge Billion Dollar Club. In fact, despite returns averaging just over 7% for the year, the global fund of funds industry still grew by more than $72 billion. In 2004, it had grown by about $166 billion. The largest funds of funds – those with over $1 billion under management - now control a combined amount of more than $631 billion in assets under management, according to the end-2005 asset flow survey carried out by InvestHedge, the leading publication that tracks hedge fund investors. ‘Low volatility was the most frequently blamed factor for another lacklustre year in terms of performance. The long awaited asset flow slowdown has finally taken place, but not across the board, proving that the right infrastructure, resources, range of products, distribution as well as performance, will continue to win assets,’ says Niki Natarajan, editor of InvestHedge. ‘Many firms that do not feel that they can compete across all fields will be looking to partner up with other firms or distribution channels, a trend that started in earnest in 2005.’ Those 134 groups in the InvestHedge Billion Dollar Club now account for close to half of all the assets invested in hedge funds, if one assumes that about $1.3 trillion is invested in hedge funds globally. The number of groups in the InvestHedge Billion Dollar Club (those running assets of over $1 billion) grew from 119 to 134 in 2005. And the InvestHedge `Super League’ – funds of fund groups with assets of more than $10 billion – grew to 17 members, representing about $287 billion of the total survey assets. UBS Global Asset Management A&Q has not only taken the top slot as the largest fund of funds group in the world but it has also breached the $30 billion under management threshold. GAM, which is now part of the Julius Baer Group, saw outflows of more than $1.4 billion and slipped to third place with slightly more than $23 billion under management, primarily because its product range has been closed for most of the year and not able to take in new inflows. UBS, which now only includes UBS Wealth Management USA, is the second largest hedge fund player in the world with $32.6 billion in total, making the Man Group, which currently has about $39 billion in total fund of hedge fund assets the largest hedge fund group in the world. Reuters coverage: Growth of fund of hedge fund assets slows From Weak average returns slowed the growth of assets managed by the world's largest fund of hedge fund groups to around 12 percent last year from 42 percent in 2004, trade publication InvestHedge said on Monday. The survey showed assets managed by the 134 largest fund of hedge funds -- those with more than $1 billion under management -- rose by $72 billion to $631 billion last year. Of the $72 billion, around 7 percent -- the average return produced by fund of hedge funds -- was probably due to investment gains. Dow Jones coverage: Largest FoF control half hedge fund assets From Dow Jones/Morningstar: More than one-fifth of the world's hedge fund investments are controlled by just 17 funds of hedge funds, data provider and trade publication InvestHedge said Monday. Once 117 further hedge funds managing at least $1 billion are added to the figures, collective control of hedge fund assets rises to $631 billion - or nearly half of total hedge fund investments.