Reuters.uk – Funds of hedge funds are likely to change how they operate and offer more tailor-made advice as institutional clients become more confident about investing directly in the $1.7 trillion(900 billion pounds) hedge fund industry, a consultant said on Wednesday.
Clients like pension plans, who are pouring billions of dollars into alternative assets like hedge funds, will increasingly demand that fund-of-hedge-fund companies give more bespoke advice and consultancy service to justify their fees, Kevin Quirk, partner at Casey, Quirk & Associates, told a conference.
“Business models are going to change in the fund-of-funds industry,” he said at the Global Alternative Investment Management conference.
Funds of hedge funds currently take the lion’s share of institutional money because these companies spread money among a variety of different investment strategies, cutting the risk that a client will lose a big chunk of money if a hedge fund fails.
Funds of hedge funds normally charge an additional layer of fees on top of the sums levied by the individual portfolios. A hedge fund typically charges an annual management fee of 1 to 2 percent of assets and performance fees of up to 20 percent. To justify the added fees, fund-of-fund firms say they take care of monitoring investments on a client’s behalf.
