The fund of hedge fund business is strong and is regaining momentum and America is leading the way, says Dixon Boardman, founder of Optima Fund Management.
Boardman (pictured) cites figures from Hedge Fund Intelligence noting that in 2012 North American firms saw assets grow by an average of some 3.47 per cent while non-US firms had continued to register significant outflows.
Optima, founded in 1988, is celebrating its 25th anniversary with assets under management breaking through USD4bn. He emphasises, however, that the profile of today’s investors in FoHFs has altered significantly over the years.
“The most obvious change is that the business has come to be dominated by institutional investors whereas at the outset, the focus was mainly on the high net-worth sector,” he says.
Optima’s assets under management currently split 60 per cent institutional and 40 per cent HNW.
“Furthermore, we’ve also witnessed an important change in the profile of institutional investors, themselves,” Boardman says. “Early adopters and more sophisticated institutions are increasingly taking the manager selection and monitoring process in house – they have climbed the learning curve. Next along the ‘escalator’ are institutions that may have started out relying on funds of funds and are now turning to customised solutions that better fit their overall investment programmes. And then there are the newer or smaller institutions for whom investing in funds of funds is perfectly sensible.”
Launched in 2007, the Optima Partners Focus Fund enables investors to invest with a highly select group of established hedge fund managers, each running a concentrated portfolio of their best ideas.
The Focus Fund, which recorded a net return of 17.43 per cent in 2012, continues to perform well in 2013 with first quarter net returns of 12.9 per cent.
“Manager selection is key,” says Boardman. “Top-quartile hedge fund managers have materially outperformed the averages, often with less risk. But superior manager selection is a costly and time consuming process that few are qualified to perform.”