Why hedge-fund middlemen must adapt or die

Crain’s – Firms that invest in hedge funds on behalf of large institutions and wealthy individuals—an industry that got its U.S. start in Chicago more than 40 years ago—are recasting their businesses as clients unhappy with an extra layer of fees are bypassing the middlemen.

In the most striking local example, Chicago-based Grosvenor Capital Management LP, a pioneer in creating funds of hedge funds, paid $200 million this month to buy a private-equity business. It’s also starting a mutual fund, as are smaller rivals in the city. And all the firms are offering to tailor hedge-fund investments to individual client needs, as opposed to one-size-fits-all funds.

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