Progress report
An assessment of hedge fund YTD performance in the face of renewed fears for a potential eurozone crash Read More
22/06/2011
Comment: Jim Tomeo
.
To what extent are you seeing more customised fund of funds solutions; for example, ‘funds of one’, funds of managed accounts, etc? Is this something you expect to see more of in the future?
FoHFs have responded to their institutional investors’ call for greater transparency and control over investments by developing managed accounts, including funds of one and other customized solutions. However, the pressures driving this need seems to have diminished as memories fade and the complexity of these structures becomes apparent. In the wake of the financial crisis, some industry observers believed that investors would face a choice between FoHFs and funds of managed accounts (FoMAs). Instead, managers and investors alike appear willing to mix and match the best elements of both investment structures, together with direct hedge fund investing to better balance the need for liquidity with overall access to a talented manager pool.
To what extent are FoHFs taking on a more advisory role in terms of their relationship with investors?
FoHFs are increasingly prepared to offer their insights and expertise without necessarily serving as the investment advisor or manager to an advised investment structure. Some sophisticated asset owners are seeking customised, bespoke advisory services from FoHFs and then undertaking their own direct fund investment. Most FoHFs are well positioned to support this effort given their operational infrastructure and due diligence capabilities. In a complex market, FoHFs retain a critical utility for institutional investors, helping them to navigate among thousands of hedge funds, and to undertake due diligence and ongoing management of direct fund exposures. Institutional investors who are dominating asset flows are demonstrating greater selectivity, looking for FoHFs with solid performance, in house operations, administration, compliance and governance capabilities to assist them in managing their home grown alternative investment programs.
To what extent is the issue of fees a factor in deciding whether or not to invest in a FoHF? Do you expect that most funds will adapt their fee levels/structure going forward?
Good performance will continue to drive full fees for hedge funds as well as FoHFs. As investors become satisfied that FOHFs can deliver value-added performance within a well risk managed operational infrastructure, fee pressures should diminish. However, for boutiques that can deliver both, performance and infrastructure, their strategies will likely remain in demand with fees that remain firm.
What are the main challenges facing the funds of funds sector going forward, and what can it do to overcome them?
New regulatory requirements in the US and Europe will likely be a drag on short and medium-term industry profitability. While the number of funds may fluctuate, assets under management are likely to grow much larger. Beyond any question of size, however, the industry can anticipate becoming more complex, as regulatory scrutiny expands, investment vehicles proliferate, investment targets multiply and systemic risk analysis improves. For example, heightened concern over counterparty risk has already cast doubt on the model by which prime brokers assumed custody for all of a manager’s assets. As a result, investors will likely maintain their push for greater transparency, liquidity and safekeeping of assets. In turn, independent service providers including administrators, prime brokers and custodians will play a significant role in setting the standard for services that investors will increasingly expect. Their ability to combine sophisticated administration, technology-rich prime brokerage solutions with traditional custody will help the industry to mature in a more risk controlled manner.
Jim Tomeo is chief operating officer at SSARIS Advisors, an affiliate of State Street Corporation
- Share
-
Text Size
Decrease text size
Increase text size
60 seconds with... Kenneth Turchin
CAN YOU DESCRIBE YOUR CURRENT ROLE?
I have worked in public accounting and hedge funds and in the past eight years have been selling middle- and back-office services to the alternate investment industry. My role is to build relationships with clients, teach them about SS&C’s products and services, and ensure seamless transactions every time the firm launches a new fund.
IF YOU WERE DOWN TO YOUR LAST £1,000, HOW WOULD YOU INVEST IT?
I would buy THREE shares in Apple and hope for a repeat 383% return in the next five years.
WHAT WOULD YOU DO IF YOU WERE IN PRESIDENT OBAMA’S SHOES?
That’s one pair of size 12 shoes I do not want to be in!
WHO WOULD PLAY YOU IF THEY MADE A MOVIE ABOUT YOUR FIRM?
Kevin Bacon. He is a versatile actor and the centre of the entertainment universe. I am in sales. Everyone in the industry would be linked to me in six steps or less. My client list would be ridiculous.
SS&C wins Form PF mandate from $23bn Lone Pine
SS&C Technologies, the hedge fund administrator, has been mandated by $22.7bn Lone Pine Capital to provide its Form PF reporting solution, HFMWeek has learned.
Squeeze on fees continuing, according to State Street
Downward pressure on fees for hedge fund services such as administration, alongside an increased demand for more transparency on pricing, continues to be a defining industry characteristic, State Street executives said today.
OPERS hires COMAC for $120m as part of $3bn hedge fund spend
The Ohio Public Employees Retirement System (OPERS) has committed $120m to COMAC Global Macro Fund and plans to hire new funds during the second and third quarters as part of its effort to commit around $3bn in fresh capital to the space by the end of the year, HFMWeek can reveal.
Investor demand for CTAs is on the rise, says Agecroft Partners
Agecroft Partners is seeing widespread demand from institutional investors for Commodity Trading Advisors (CTAs), which is a dramatic change from the historical reluctance of many institutional investors and their consultants to allocate to this strategy.
Read More07/06/2012
UK: Impact of the AIFMD - the real story
Join us and our panel of experts for HFMWeek's Subscribers' Club June's UK breakfast briefing, 'Impact…
31/05/2012
US: Family Offices
The next US HFMWeek Subscribers' Club breakfast, will take place on Thursday May 31. Join us and…
02/02/2011
European Hedge Fund Services Awards 2012
HFMWeek's European Hedge Fund Services Awards are designed to recognise companies that have outperformed...
Be the first to comment on this article!