Fund of Hedge Funds

[trade2make£]

Hello all,

Does anyone know anything about the structure of a Fund of Hedge Funds firm - is there a main front office where trading takes place? is the fund of funds electronically brought and sold? - Whats people's opinion on fund of hedge funds? any info would be very much appreciated.

Regards,

 

[dawhizzy]

And also, Where can I get a good list of fund of hedge funds to apply to for graduate jobs?

Sorry, did not mean to hijack the thread!

 

[Mathemagician]

Funds of Funds don't trade, they hire outside managers. FoF are basically sales/marketing firms plus (for the good ones) a bit of risk management.

jj

 

[Mathemagician]

This is probably not the best place to seek career advice.

jj

 

[matifx]

Hello all,

Does anyone know anything about the structure of a Fund of Hedge Funds firm - is there a main front office where trading takes place? is the fund of funds electronically brought and sold? - Whats people's opinion on fund of hedge funds? any info would be very much appreciated.

Regards,

These try to allocate funds to several manager using various statistical methods and models, such as risk correlations and mean-variance optimization.

Usually, they do not trade and just have sales offices as mathemagician indicated.

Also, they tend to perform badly since exceptional manager performance is often counterbalanced by other managers losing money.

 

[trade2make£]

Not so much looking for career advice mainly just want a discussion on Fund of Hedge Funds and i don't fully understand them.

So does anyone rate fohf's ? I'v heard allot of bad press on them recently, is the feeling mutual on here ? Would anyone go and work for one from investment banking ? is it a good way into working with hedge funds or not?

One thing im not sure about, is it has a certain 'sheep' feel - and is basically following the crowd and not actually taking the core responsibility - but is this a good/bad thing? what are other people's thoughts?

 

[smarks999]

Well a fund of funds buys into a fund and is done as a legal agreement and shares are allocated. They are not that popular, but recently have preformed better (not lost much money compared to a single fund) because of the fact they had a "diversified portfolio". Also they tend to have long tie in periods, up to 5 years. There are a few books which go into detail, but in all honesty they are just like any other financier who give money to funds (buy into them) to maximise on potential gains. I don't know where you can find a directory of them for free. The professional performance directories are up to $5K. To the best of my knowledge the only thing that occupies their offices are a number of analysts the usual administrators and a legal and audit team. Only public funds allow electronic or OTC buy-ins and the costs can be fairly substantial.

 

[Monkey_typewriter]

I'm in a junior position at a FoHF in London, I'm still studying part time so it is good exposure for me with reasonably regular office hours.

Due to the liquidity of hedge funds we do not trade, we make subs and reds one day a month.

As pointed out by smarks, we have a research team, risk team, fund admin and legal. Our main clients are insititutional, with a few charities and HNW individuals. The research team are mainly guys who have been traders, brokers etc and are seeing out the end of their careers before they had breakdowns!

From my point of view; I'm learning a lot about the hedge fund industry and how hedge funds function, mostly about their trades, which is brilliant. As you know hedge funds are very secretive so this access for me is rather valuable! As a career path into hedge funds, I'll have to let you know in a few years.

To start as a Junior Analyst you will need a Masters or equivalent in Finance, then your training will take about 3 years.

 

[anley]

A HFOF charges A LOT of fees. Many therefore say they're hard to make a decent return on after everyone BEFORE the investors (who assume all the risk) have been paid.

Always exceptions to the rules of course but I doubt that many.

 

[trader3cnd]

people who cannot perform well enough to have a fund start a fund of funds.

 

[Monkey_typewriter]

people who cannot perform well enough to have a fund start a fund of funds.

Perhaps. But it is a completely different type of investing.

We have hedge funds with equal AUM to our fohf.

A HFOF charges A LOT of fees. Many therefore say they're hard to make a decent return on after everyone BEFORE the investors (who assume all the risk) have been paid.

Most fohf charge lower fees than a hedge fund, maybe 1.5 & 10, some only charge a perf. fee. Obviously we are paying the funds we invest and then taking our fees as well. FoHF are very low risk, hence the lower returns.