Funds of hedge funds lost more than $100bn in 12 months because of outflows and poor performance, according to a new report.
Bloomberg News reports that clients pulled $50.3bn over the four quarters through March, while managers posted $51.5bn in investments losses, research firm eVestment said Friday after analyzing data from more than 2,500 funds. Assets in the sector shrank 11% to $841.6bn, the lowest since June 2009.
“Their dominance as allocators to hedge funds has been waning steadily since their heyday prior to the financial crisis and we do not currently see any evidence of this trend abating,” eVestment wrote. “Although the industry is certainly far from lost, we have yet to hit the floor on support levels for funds of hedge funds."
Funds of funds, which invest in portfolios of hedge funds, have struggled to keep clients amid disappointing returns from underlying managers and a backlash over the layer of fees the firms charge to act as middlemen. Trimming fees hasn’t helped much because clients can instead invest directly in hedge funds, as the $53bn Alaska Permanent Fund Corp. opted to do last month. Earlier this year, Aurora Investment Management decided to shutter after redemptions derailed its planned takeover by another fund-of-funds firm.
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