Scotsman – Fund of hedge fund firms will have to be more creative about the products they offer to survive in an overcrowded sector, said Bill Maldonado, head of alternative investments at HSBC Halbis Partners.
Funds of hedge funds invest in diversified portfolios of hedge funds to reduce the chances of losing money, do due diligence and monitor business and investment risks.
But many are now struggling, because strong recent demand for hedge funds has attracted new players into the market, and competition is fierce.
Analysts estimate there are around 800 firms offering more than 1,700 funds of hedge funds.
“The evidence shows that it has been very difficult for the majority of firms to add value to the tune of the fees that are being charged … Customers are becoming wise to this,” Maldonado told Reuters.
Funds of hedge funds have been an access route to the industry for many investors, such as pension funds, that are not normally allowed to invest directly in hedge funds.
