Fund Of Hedge Funds Flying Higher

Date: Tuesday, February 13, 2007
Author: Dailyii.com

Neither volatile markets, nor meltdowns such as Amaranth Advisors, not even average performance were able to sap the fund of hedge funds sector of its money magnetism last year, as the sector attracted more than $183 billion, way up from the $72 billion in 2005, according to the latest survey by the InvestHedge Billion Dollar Club Survey. Even though the sector gained only 8.67% in 2006, its asset growth rate of 29% was more than double the 13% of 2005, though a far cry from the 44% in 2004. "This was a surprising year as many had expected the impact of Amaranth to hit performance there asset flows in a bigger way," says editor Niki Natarajan of InvestHedge, a sister publication of Hedge Fund Daily. Natarajan noted further, "The asset outflow might be localized in a few firms in the coming months, but overall the new asset inflows from the first-time investors continues to be strong." What has changed is the rise of the boutique, as "investors start to look for something different, yet still in the fund of funds space."

The study also found:

-- Firms with more than $1 billion AUM held a total of $820 billion.

-- The number of HF management firms with $1 AUM rose to 142 from 135 in 2005.

-- The 21 funds of hedge funds with more than $10 billion AUM grew 30% to $425 billion

-- Institutional investor assets accounted for more than 50% of the AUM in 77% of firms

According to InvestHedge, UBS Global Asset Management A&Q’s $43.4 billion as of Dec. 31 combined with the assets of UBS Wealth Management, make it the largest FoHF group with $45.66 billion, followed by Man Group, with $45.3 billion. In terms of FoHF without affiliates, UBS is No, 1, followed by Union Bancaire Privee ($34.64 billion), Permal Investment Management ($28.6 billion), GAM Multi-Manager ($27.74 billion) and HSBC Alternative Investments ($27.6 billion), rounding out the top five.