Fund of Hedge Funds Industry Shrinks by 30% – Says InvestHedge Billion Dollar Club survey

The funds of hedge funds industry shrank by nearly 30% in 2008. Volatile markets, zero liquidity, and year-end average returns of -16.63% led to the asset outflows for the global funds of funds industry, according to the latest survey of the InvestHedge Billion Dollar Club.

The largest funds of funds – those with more than $1 billion in assets under management – now control a combined amount of $744 billion in assets, according to the 2008 asset flow survey carried out by InvestHedge, the leading publication about investors in hedge funds.

“The industry has taken a serious beating but it is not an industry that is on the brink of extinction. The multi-manager approach and professional selection of hedge funds is still very much essential for the creation of a healthy hedge fund portfolio,” says Niki Natarajan, editor of InvestHedge. “What has happened is that the barriers to entry have finally gone up and only those that are serious representatives of the funds of funds industry will win the institutional money.”

“This clear-out was necessary as there were too many sloppy practices in the industry. Everyone, large or small, good or bad, will be going back to the drawing board to make sure that their business can stand the highest level of scrutiny.”

There are now 137 funds of hedge fund management companies in the InvestHedge Billion Dollar Club and if the assets of the smaller 420 or so funds of funds management companies are also included, this universe still manages roughly half the assets of the hedge fund industry (which currently measures about $1.8 trillion in all according to the latest HedgeFund Intelligence data). Some 27 groups fell out of the rankings after shutting their businesses or the assets falling below the $1 billion level.

UBS Global Asset Management A&Q with total assets of $34 billion regained the top slot in the rankings having lost in the mid-year survey to Union Bancaire Privée, which now has $33 billion in total assets. If the assets of UBS Wealth Management USA are added in, UBS has a total of $36.8 billion, making the largest hedge fund of fund management group in the world.

Man Group, which includes RMF Investment Management, Glenwood Capital Investments and Man Global Strategies, now has a total of $26.6 billion, taking its global position as a group to 4th in the rankings after HSBC, which has $31.9 billion.

Top 10 largest Funds of Funds

31 December 2008

Assets $bn

UBS Global Asset Management A&Q

Union Bancaire Privée

HSBC Alternative Investments

Permal Investment Management

Blackstone Alternative Asset Management

Goldman Sachs Asset Management

Credit Suisse

Grosvenor Capital Management


GAM Multi-Manager



Source: InvestHedge


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