Reuters- Funds of hedge funds, which promise to spread the risk of investing in these loosely regulated portfolios, may soon find new customers as investors are again ready to pay more for peace ofmind.
“Blow-up risks are the biggest worries for investors and you need people on the ground to do the research,” said Bryan Schneider, who helps select hedge funds at New England Pension Consultants.
“Funds of funds offer more liquidity with more oversight,” he said at the MARHedge conference in Bermuda.
Managers of such funds review hundreds of the roughly 9,000 funds in the $1.9 trillion industry before selecting a handful for clients’ portfolios. For additional fees, they promise to protect clients from investment mistakes in an industry long viewed as secretive and difficult to navigate.
One big investor looking over such funds is the Puerto Rico Government Employees and Judiciary Retirement Systems Administration, which is considering its first hedge fund investment.
“I believe the system plans to go with funds of funds,” said Luis Alvarez, chief investment officer for the $3 billion Puerto Rico fund.
For endowments and public pension funds, a fund of hedge funds often helps make the initial hedge fund selection.
