For some time there have been questions raised about the sustainability of the business models of funds of hedge funds as a category. There is no doubt that they will continue to exist and that there will be winners as well as losers. But the rising tide of assets in the hedge fund industry is not lifting all the FoF boats. Only this week quoted hedge fund company Man Group reported minor growth in its single manager businesses and minor shrinkage in its multi-manager business (see previous article).
Each year PerTrac, the hedge fund software provider, produces an analysis of the composition and size of the single-manager hedge fund and fund of hedge fund industry. The 2011 study was produced by aggregating investment data from eleven of the world’s largest alternative databases – BarclayCTA, BarclayHedge, CogentHedge, Eurekahedge Hedge Fund, Eurekahedge Fund of Funds, HedgeFund.net, Hedge Fund Research, MondoAlternative, MorningstarHedge, Tass, and TassCTA. The combined number of investments from these eleven databases was nearly 56,000 entries. Duplicate records for single-manager hedge funds, CTAs and FoFs were removed so that a single record per fund was retained in the study to create a holistic industry list.