Does shift away from funds of funds mean diversification is dead?
| May 4th, 2008 | Filed under: Hedge Fund Industry Trends | By: Alpha Male |
On Friday, Bloomberg reported that the proportion of hedge fund assets invested in funds of funds has decreased over the past 5 years while the proportion of assets invested in single manager funds has increased. For a long time, fund of fund investors have defended the practice of paying “fees on fees” by saying they were actually paying the second layer of fees in exchange for “knowledge transfer”.
Now it appears they weren’t kidding. Bloomberg cites Pensions & Investments data that shows the proportion of US pension assets invested in funds of funds fell from 57% to 49% over the 2002-2007 time period.
Meanwhile, Euopean funds of funds seem to be doing just fine – this according to Global Pensions. The magazine reported back in March that:
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[...] The upshot of a shift away from fund of hedge funds. (All About Alpha) [...]