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Blackstone, UBS, Goldman Gain in Shrinking Fund of Funds Biz

By Lydia Tomkiw

The majority of the hedge fund of funds industry’s largest players have continued growing since 2016, with Blackstone Alternative Asset Management leading the pack, followed by UBS Hedge Fund Solutions, and Goldman Sachs Asset Management, according to data compiled by Preqin. The growth comes as the fund of funds space continues to shrink its ranks and put greater focus on customization and expanding its footprint into new areas such as co-investments, industry watchers say.

Alongside heightened merger and acquisition activity in recent years and outflows that have roiled the space, liquidations continued to outpace launches for the sixth consecutive year, with only 20 funds opening their doors so far in 2018 while 54 have closed, according to Preqin.

Opportunities for growth remain around customized solutions, but challenges remain ahead for the fund of funds space, especially with fee pressure, says Stuart Blair, director of research at Canterbury Consulting.

“If you’re below $10 billion, it’s hard to run a business based on the fee schedules and the work that needs to be done,” he says.

Still, the demand for fund of funds remains, he adds, especially with clients that don’t have the resources to vet multiple hedge funds. “There’s demand for it but the [managers] that will benefit are the ones with big groups and custom options.”

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