March 2012 – Infovest21 Survey: Average fund of funds allocates 12.5% of portfolio assets to small managers and 44.2% to medium-sized managers
Infovest21 on Mar 7th 2012
Infovest21’s annual fund of funds survey provides a snapshot look at the typical funds of funds organization in today’s environment. Infovest21 conducted the survey in January and February 2012. Fifty-five funds of funds completed the survey. Of those, 64% were from the US, 31% were from the UK and Europe with the remainder from Japan, Asia and the Middle East.
Highlights include:
Assets
The average asset size of the fund of funds organization responding to the survey was $2.6 billion. The respondents said, on average, at least $1.6 billion is needed to “survive and thrive.”
About 38% have seen an increase in assets under management while 38% have seen a decrease in assets from a year ago.
Underlying Managers and Portfolio Composition
The average number of underlying managers is 47.
The average fund of funds allocates 12.5% to small managers (less than $100 million in assets under management), 44.2% to medium-sized managers ($101 million to $999 million), 28.6% to large managers ($1 billion to $4 billion), and 14.5% to mega managers ($5 billion+).
The most frequent change as cited by 30% of the funds of funds was adding more nimble managers. Another 28% said they offered more customized product and 28% said they became more institutionally client oriented.
Almost two-thirds of the funds of funds offer strategy-specific funds of funds. Equity long/short, global macro and commodities were most frequently cited.
The typical fund of funds organization has 224 investors with the average investor making an $11 million allocation.
High net worth/family offices make up about 45% of the average investor base while financial institutions comprise 22% and pensions 20%. Foundations, endowments and sovereign wealth funds account for the remainder.
Terms
The average fee structure is a 1.1% management fee with a 6.9% performance fee. 80% said they haven’t changed their fees since last year. 7.5% said they lowered their management fee and 7.5% said they reduced their incentive fee.
Consolidation
Almost one-half of the respondents have considered a strategic partnership while one-third considered acquiring another entity. Another one-quarter have considered merging or have merged with another firm while one-quarter have considered a joint venture. 11% have considered closing down. Adding to assets and/or distribution channels was the main motivation in these efforts.
The full 70-page report is available by contacting Infovest21 at 212 686 6440 or general@infovest21.com
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