It’s been a rough few years for the hedge fund of funds space in which liquidations vastly outpaced launches and numerous mergers and acquisitions consolidated the market. But the pace could be starting to level off, industry watchers say, as investors look increasingly to fund of funds shops for customization and niche offerings.
The fund of funds space had 196 funds liquidate in 2016. Another 124 closed down in 2017 with only 54 launching, according to data provider Preqin. Midway through 2018, however, the activity has eased up, with 17 funds shutting their doors and 13 opening, leaving the sector with 2,152 active funds by Preqin’s count. It comes as funds of funds have returned on average year-to-date 1.45%, just slightly above average hedge fund performance, Preqin reports.
“It has cooled off,” says Stuart Blair, director of research at Canterbury Consulting. “But, there are still some fund of funds groups out there that have $1 billion or $2 billion or less and it’s hard to see those folks persisting for a long period of time, at least [as] off-the-shelf fund of funds vehicles.”
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