launches have been declining every year, prompting a “reinvention” in the
multi-manager fund space, according to Preqin.
Preqin’s data showed the
number of funds-of-hedge-funds liquidations have been double that of fund launches
over the past two years.
In 2016 alone, new fund
launches failed to reach 50 while liquidations were close to 100. Last year,
the number of liquidations surpassed 150 despite only 50 or so new funds launching.
“The high number of
liquidations in recent years shows that funds-of-hedge-funds managers are
finding the current environment challenging, and for some, consolidating their
firm is a route forward,” Preqin wrote in a note.
Recent mergers in the
industry include EnTrust Capital and Permal Group’s combinations into EntrustPermal,
Fiera Capital’s acquisition of Larch Lane Advisors, and Aberdeen purchasing
Arden Asset Management.
In an effort to better
meet investors’ demands—and avoid liquidations—managers have been moving away
from traditional commingled products towards “solutions-based services,” Preqin
This shift also
contributed to the recent decline in fund launches, the note said.
“Now more than ever,”
Preqin continued, “funds-of-hedge-funds managers need to offer more in the way
of customized solutions, managed account platforms, and separately managed
account services, with the increased flexibility in helping to insulate
funds-of-hedge-funds managers from criticism of fee structures.”
Owners Firing Funds-of-Funds—And Hiring Their Talent