The State of the Fund of Hedge Fund Industry

Despite the fact that funds of hedge funds (“FoHFs”) have become less popular following the 2008 global financial crisis and have been competing with consultants who are offering clients their own co-mingled vehicles, they have managed to reinvent themselves.  At this month’s EisnerAmper breakfast series solely for fund managers and investors, a quartet of esteemed panelists shared their perspective.  

They included:

-Michael Dubin, Managing Director, Silvercrest Asset Management Group

-Jeffry Haber, Controller, The Commonwealth Fund

-James Shelton, Chief Investment Officer, Kanaly Trust Company

-Neal Berger, President, Eagle’s View Asset Management .

Here are what the panelists said: 

-The FoHF industry is in a state of transition and many FoHF managers are doing advisory work, creating liquid alternatives products or launching their own single-manager hedge funds.

-While some FoHF managers continue to favor the more mainstream hedge fund strategies such as long/short and event-driven, others prefer more niche-oriented and capacity-constrained offerings.

-Investors are shifting their focus from large funds to small and mid-sized ones.

-Despite increased investor demand for separately managed accounts, speakers expressed caution with these structures, arguing they are complicated and only certain types of strategies are viable in that format.

-Finally, they predict that the best hedge fund managers will continue to charge high fees going forward.

Stay tuned for the next breakfast on Managed Accounts May 13.