WEST PALM BEACH, FL (www.hedgeco.net) – The dull performance of both stocks and bonds continues to push new investors towards Hedge Funds, particularly the Fund of Funds category. According to datafrom the Chicago based Hedge Fund Research, the number of new Fund of Funds categories coming to the market since 2001, has tripled not only in their numbers, but also in the level of assets beingmanaged. Fund of Funds are Hedge Funds specializing in channeling their investments into other hedge funds. They generally require lower minimum investments since such vehicles also pool togetherinvestments from many individuals and groups prior to allocating their assets to selected managers. Many investors continue to lose confidence in the traditional investment strategies such as thoseemployed by mutual funds. Hedge Funds on the other hand have become appealing because of their robust trading techniques which may also include short-selling techniques.

But some analysts have complained about the level of fees charged by the Fund of Funds managers, which is generally on the same level as those charged by other Hedge Fund managers. Hal Eddins, fund manager with Capital Investment in Raleigh, said, “When there are more hands in the pot, the returns you might get after all additional management fees are not quite so brilliant.�

According to published reports, Fund of Hedge Funds posted an average return of 7.5 percent per year, between 1997 and 2004. Such returns were slightly below the average of 10.4 percent posted by Hedge Funds other than the Fund of Funds. Nonetheless those returns satisfied their investors, as more of them continue to devote additional assets to such vehicles. Fund of Hedge Funds have also been popular because of their ability to invest money with talented managers, unavailable to such investors acting on their behalf. Even some traditional money managers have been setting up their Fund of Funds vehicles hoping to get some of the new business. Greg Carlson, a mutual fund analyst with Morningstar said, “People are looking for one-stop investing and these specialized funds help them do that without taking on too much risk.�

Paul Oranika
Editor-in-Chief
HedgeCo.Net
Email: Editor@hedgeco.net

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