Fund of Hedge Funds Investors
Funds of Hedge Funds Face Challenge from Investors
This is an interesting trend in the hedge fund industry, fund of hedge funds are struggling to keep clients because their clients are getting more sophisticated. That in turn, has led to more institutional investors selecting their own stable of hedge fund managers rather than relying on fund of hedge funds to manage a fund portfolio for them.We've seen this on the family office side at times, with many family offices developing highly-advanced fund manager selection processes instead of relying on funds of hedge funds, and it appears that institutional investors are doing so as well following the lead of calPERS and other multi-billion dollar institutional investors.
For funds which market themselves on their ability to spot the sharpest hedge fund minds, it could be their greatest challenge yet. Investors who once trusted them to find the best returns are gaining the expertise and confidence to do it themselves.
U.S. pension funds like the giant $240 billion California Public Employees Retirement System (CalPERS) have picked single hedge fund managers for years. Now smaller players are following suit.
Massachusetts' $48 billion state pension fund for instance recently completed a $500 million direct investing program, moving to cut its reliance on funds of funds.
Meanwhile, in Europe, pension funds for companies such as ABB, Nestle and Novartis are following the example set by insurers Swiss Re and Zurich Financial, Zurich University's hedge funds specialist Peter Meier said. Source