20/04/2011 Author: Shannon Hawthorne

Gottex FoHF sees rise in niche fund opportunities

Gottex Fund Management, the global fund of hedge funds (FoHF) firm with over $8bn in total fee-earning assets, is seeing increasingly attractive investment opportunities offered by smaller, niche managers, according to Chris Hawkins, managing director and head of European research.

Approximately 20-25% of the managers in the FoHF’s offshore fund portfolios currently fall into this category, says Hawkins, who stresses that the increase in interest is organic, rather than conscious.

“Markets always have a liquidity premium component to them and, in that sense, smaller funds are at an advantage, namely that a $50m fund that is able to take a $5m position in a particular strategy can add value that a $5bn fund could not possibly do,” says Hawkins.

The increase in experienced managers, who have historically run very large books, running smaller funds post-2008 is another key factor in the growing attractiveness of these vehicles.

“As we visit managers during the due-diligence process, we tend to be excited by finding a fund headed up by someone who used to run a $5bn prop desk and is now running a $50m fund,” says Hawkins.

He continues: “When you look at the investment proposition of a fund which manages $20bn and ask yourself, ‘Can this fund outperform the $200m fund that we are looking at alongside it?’, today, regularly, the answer is ‘no’.”