Advisors who don't feel like wading through reports on 9,000 hedge funds may feel more comfortable scanning information on about 40, especially if those funds have been expertly screened. Envestnet, a Chicago-based provider of wealth management solutions for investment advisors, has announced a hedge fund research alliance with Fund Evaluation Group (FEG), Cincinnati, an institutional investment consulting firm with $33 billion under advisement.
The Envestnet-FEG partnership will offer advisors access to research and due diligence reports on more than 40 hedge funds and hedge fund-of-funds that are covered by FEG. The research will be available on the Envestnet platform, which also includes information on separate account managers, mutual funds, ETFs and liquid alternative investments.
"More advisors had expressed interest in hedge funds," Ryan Tagal, Envestnet's vice president of product management, told Financial Planning. "We thought about doing the research ourselves or finding a partner, and we chose to work with FEG because of its reputation in the industry for researching hedge funds."
As Tagal explained the process, "FEG started with some 9,000 hedge funds, all the ones out there. Of that universe," he said, "about 1,000 funds are followed, and around 40 are on the FEG research list. Those funds have been filtered out to be the best of breed."
According to Tagal, the funds chosen for the Envestnet platform span all the major hedge fund categories. "These funds are still taking on new capital so there is room for investors," he said. Minimum investments are generally $1 million or $5 million; advisors can study the information available on these hedge funds and recommend them to suitable investors willing to make such an outlay.
"A certain segment of client--accredited investors and qualified purchasers--is seeking alternative assets for non-correlation and possible alpha," Tagal said. "These clients want to go beyond the traditional mutual funds and separately managed accounts, so there is a lot of interest in hedge funds."
The hedge fund data on Envestnet's platform will include research reports, manager and strategy overviews, fund terms and service providers, historical performance and exposure detail. Advisors also will have access to quarterly monitoring reports, with quantitative analysis as well as commentary on quarterly performance and organizational updates.
"This partnership is the natural progression of Envestnet's commitment to providing advisors with a better way to manage wealth," James Patrick, managing director of advisor managed programs at Envestnet, said in a statement. "FEG is leading the movement to democratize investing in hedge fund strategies and we believe the company's research and due diligence process complements and enhances the solutions on our platform."
FEG's hedge fund evaluation process includes on-site meetings, operational due diligence, third party service provider verification and multiple reference checks. FEG also provides ongoing monitoring of hedge fund managers via performance analysis, risk monitoring, position level monitoring, quarterly conference calls and face-to-face meetings to verify the manager's continued ability to deliver excellence.
"Adding this hedge fund research is part of our ongoing commitment to serve the needs of wealth managers," Tagal said. "We offer access to a full breadth of investment research, and the hedge fund information will be very complementary."