Markets Take a Chunk Out of Fund of Hedge Funds Industry

March 10, 2009 ( - The funds of hedge funds industry shrank by nearly 30% in 2008, according to the latest survey of the InvestHedge Billion Dollar Club.

The global funds of funds industry had year-end average returns of -16.63% – losing more than $300 billion in assets in 2008, InvestHedge said in a press release. The largest funds of funds – those with more than $1 billion in assets under management – now control a combined amount of $744 billion in assets.

However, Niki Natarajan, editor of InvestHedge, says the industry in not in danger of extinction. “What has happened is that the barriers to entry have finally gone up and only those that are serious representatives of the funds of funds industry will win the institutional money,” she said in the press release.

There are now 137 funds of hedge fund management companies in the InvestHedge Billion Dollar Club, including 14 new additions, and if the assets of the smaller 420 or so funds of funds management companies are also included, this universe still manages roughly half the assets of the hedge fund industry (which currently measures about $1.8 trillion in all according to the latest HedgeFund Intelligence data), the announcement said. Twenty-seven groups fell out of the rankings after shutting their businesses or their assets falling below the $1 billion level.

UBS Global Asset Management A&Q, with total assets of $34 billion, regained the top slot in the rankings having lost in the mid-year survey to Union Bancaire Privée, which now has $33 billion in total assets. Adding in the assets of UBS Wealth Management USA, UBS has a total of $36.8 billion, making it the largest hedge fund of fund management group in the world.

Man Group, which includes RMF Investment Management, Glenwood Capital Investments and Man Global Strategies, now has a total of $26.6 billion, taking its global position as a group to 4th in the rankings after HSBC, which has $31.9 billion.