Niki Natarajan, Editor of InvestHedge, surveyed the 103 funds of hedge funds that comprise of the InvestHedge Billion Dollar Club. 61% of respondents believed that consolidation would continue over the next five years while 76% of the same firms were planning to grow their funds internally. On June 2007, 147 funds managed $956 billion. In October 2012, 78 funds in the club had survived the credit crisis of 2008 and they managed only $538 billion. The top ten funds in 2007 have lost 49% in assets under management.
The club members believe that they can grow by making acquisitions of other funds of hedge funds, merging into investment banking advisory or private equity firms, creating customized portfolios and sourcing new hedge fund managers. Deals have made the biggest headlines this year. The Man Group is buying Financial Risk Management. Crestline Investors is buying Lyster Watson's fund of hedge fund business. UBP Alternative Investments is buying Nexar Capital Group. In the pipeline are mergers between Kenmar Group and Olympia Capital Management and Rothschile & Cie Gestion and HDF Finance. Some examples of funds joining advisory or private equity firms are ABS Investment Management joining Evercore and Prisma Capital Partners joining KKR.
Blackstone Alternative Asset Management is the largest fund of hedge fund manager with $41 billion in assets. Its growth strategy is customizing portfolios, advisory work and providing seed capital to emerging hedge funds. Since 2007, its assets under management has grown 96%.
The source for this article can be accessed here.
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