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April 23, 2006
Creativity Required In Funds Of Hedge Funds
The competition in the hedge fund and funds of hedge funds market is increasing. As a result, fund of hedge fund firms need to be more creative in terms of the products that they offer. At the same time, these firms need to revamp their services so as to offer the best to the investors.
Also, most of the firms charge high fees and with the increasing competition, they need to justify this high fee in order to hold on to their current investors and to get new investors. The management fees in most cases are between 1 and 2 per cent of the assets. The performance fee stands at about 5 to 20 per cent over the returns that are above the promised target. At the same time the returns have been declining over the years.
So, as a result, it becomes even more important to relook at the offerings in terms of the products as well as the service. Reuters UK reports:
Funds of hedge funds invest in diversified portfolios of hedge funds to reduce the chances of losing money, do due diligence and monitor business and investment risks. Analysts estimate there are around 800 firms offering more than 1,700 funds of hedge funds.
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