Hedge funds-of-funds took in $26.4 billion in the first nine months of the year, nearly half of the net new flows into all types of hedge funds, Bloomberg reports. The business of overseeing hedge fund assets managed by other individuals now accounts for nearly 40% of the $890 billion global hedge fund business, a 33% increase from 2002, according to Hedge Fund Research.
The burgeoning number of hedge funds now exceeding 7,000 investments has created a market for investment professionals offering financial counseling to affluent individuals. American institutional investors assets under management in hedge funds are projected to increase fivefold from $60 billion to $300 billion during the next five years, according to a separate report.
Investors may sleep better at night knowing investment pros are watching over the hedge funds, but advice predictably comes with a price. Average hedge funds-of-funds lagged the Standard & Poors 500 index 10-year track record dating back to 1993 by 1.4 percentage points, according to Hedge Fund Research.