A survey by Citi Prime Finance found that hedge funds with $1 to $5 billion in assets under management grew the largest in 2010. This can be traced back to performance. Smaller funds outperform the giants by 1.88% on an annual basis. Large institutional investors such as pension and sovereign wealth funds still allocate to the larger hedge funds because they do not want to be the largest investor in a smaller fund.
Funds of funds allocations from hedge fund investors have fallen to 33% from 45% since 2006. Meanwhile, direct investments in hedge funds have risen to 66% from 55%. Funds of funds are invested in too many funds and have an extra layer of fees.
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