A “new era” for funds of hedge funds: Sunrise or sunset?
| May 11th, 2010 | Filed under: Hedge Fund Industry Trends, Today's Post | By: AAA Staff |
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Hot off the presses, London-based information provider Preqin this week released its May 2010 Hedge Fund Investor Spotlight, with the lead article being that a “new era” for funds of hedge funds (FoHFs) has finally, after two-plus turbulent years, begun.
The proof: A leveling off of assets leaving the coffers of FoHF firms, a cooling of consolidation activity among FoHFs, an increase in the number of hedge fund investments per FoHF firm and, most importantly, evidence of an increase in expected new FoHF launches in the second half of the year (click here to view some of AllAboutAlpha.com’s previous coverage of Preqin surveys and research). More…
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Consultants are the worst possible option because they do not carry any sort of responsability for the advice they give you (not to mention I had hedge funds tell me what a sloppy job they do in their due diligence process), whereas a FoHF at least to some extent alignes his interest with those of the investors.
Also, thinking that hedge fund indices outperforming FoHF indices, recently and generally, actually means that FoHFs are doing a poor job selecting managers is an illusion. Indices never take into account funds once they stop reporting, which is usually when they hit a tough spot – never mind a drawdown, but if a fund implodes, no wind-down will be reflected in the HF index, whereas its full impact will be reflected in a FoHF index.