NOTES ON BUBBLES: 1. Net return gaps 330 bps (5-year), 210 bps (3-year), 160 bps (1-year). FoHFs offer lower volatility than single managers (lower standard deviation) and their correlation to broad indices on a 1-, 3- and 5-year basis is lower than single managers.
2. The traditional 1 & 10 fee model is no longer at work. Large FoHFs appear to still have room to reduce fees further. By Barclay’s estimates, even at a 60bps / 5% fee structure, large FoHFs still can maintain relatively healthy margins (35%+).
4. 15% of FoHFs offer co-investment opportunities. Most (~80%) Small FoHFs offer only multi-strategy products.
Battle for the Middle:
The Evolving Landscape and Value Proposition
of FoHFs and Consultants, from Barclays Prime Services