LONDON (Reuters) – Multi-strategy hedge funds are growing in popularity with investors who previously chose funds of hedge funds as they cost less and can quickly move assets to markets with the most potential, hedge fund managers say.
Multi-strategy hedge funds run several investment strategies under one umbrella, while funds of hedge funds invest in a variety of independent hedge funds to spread risks.
Until recently, funds of hedge funds received the bulk of money from new investors like pension funds seeking to diversify portfolios and to preserve capital.
But recent survey evidence shows that flows into funds of hedge funds, which are said to account for between one-third and one-half of the $1.5 trillion (810 billion pounds) invested in the industry, slowed last year as returns slipped to about 5 percent — little more then investors could have earned if they’d left their money on deposit.
In contrast, multi-strategy hedge funds have grown to account for around 15 percent of the assets in the industry compared with around 8 percent in 2003.
