Managed Accounts: Not just for breakfast any more
Mar 14th, 2007 | Filed under: Hedge Fund Industry TrendsSwitching focus now from Geneva to New York, Alpha Male reports today on Managed Accounts USA, an event bringing together hedge funds, investors and those who participate in the burgeoning business of providing “managed accounts platforms” that some say will give rise to an age of “do-it-yourself funds of hedge funds”.
Many of the barbs usually lobbed at hedge funds have more to do with operations and less to do with actual investment strategy. Hedge funds are small businesses they say. Most hedge fund ‘blow ups’ are the result of operational issues – not investment issues. Buyer beware!
But the diversification and low correlation available from alternative investments (hedge funds, real estate, private equity, commodities and even high-alpha-proportion long-only funds), remain highly desirable. So what can be done?
Enter managed accounts. According to the chairman of Managed Accounts USA (UMass prof and CAIA co-founder) Thomas Schneeweis, managed accounts address many of these common concerns while maintaining the investment characteristics so desirable in hedge funds. This is especially attractive to institutional investors. And with institutions forecast to become the dominant investors in alternatives over the next 5 years, managed accounts aren’t going away any time soon.
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[…] Respondents bought more single-manager funds and less funds-of-funds in 2006. It seems that the pundits at Managed Accounts USA may have been right - funds of funds are getting the squeeze. Over half of institutions in this survey owned 10 or more single manager funds in 2006. Ironically, the number of respondents who used no single-managers at all also rose. State Street suggests this group of apparent fund of funds owners may just be new to the hedge fund industry - and may be following the common entry strategy of making a maiden investment via funds of funds. […]
[…] As a footnote, this sounds like good news for providers of managed accounts platforms.  After all, their core value proposition is the ability to slice and dice portfolios of many funds on a position-by-position basis. […]