Opening up the hedge fund world
Private banks are taking different approaches to providing access to hedge funds, but clients’ money is all heading in the same direction.
As client interest in hedge funds begins to return, despite a draconian European directive looming in the background, Europe’s private banks are looking at how best to access alternative investments.
Dutch Bank ABN Amro makes an interesting case study in this sphere. With much of the bank having disintegrated, following the loss of asset management and investment banking units, the wealth management arm is now the spearhead of the once unassailable Dutch master.
Newly independent, like Citi’s private bank found itself after its own asset management sell-off, ABN is enjoying the beauty of having a clean sheet. There is no longer pressure from corporate bosses to sell sometimes unsuitable group products.
But with around €100bn of assets to manage, there is no longer any hiding place if asset allocation is not done correctly, in clients’ best interests. Hardly any of these assets are currently invested in hedge funds. Marc de Kloe, head of alternatives at the Dutch bank, is now trying to find the most effective conduits into the hedge funds market.He has already signed a distribution agreement with French hedge funds platform Lyxor, part of the SocGen group, which will give private clients access to a range of big name funds.
Investect Private Bank, which like ABN Amro, was represented on a revealing panel discussion at PWM’s sub-advisory summit in Paris, is also keen to increase clients’ exposure to hedge funds. The South African institution has chosen the sub-advisory route instead. The bank’s global head of products, Andrew Summers, clinched a deal with Goldman Sachs Asset Management, his former employers, and JP Morgan Asset Management, who will be conducting due diligence and choosing the underlying funds.
The view at Investec is that only a large group with years of alternatives expertise can provide the level of operational comfort, administration, custody and oversight of hedge funds, which private clients increasingly need and require.
The problem is that, especially when you look at funds in a regulated Ucits III format, increasingly requested by clients, there is a limited number of funds to choose from. Every allocator is choosing the same ten or so funds. Now that a “For Sale” sign is once more up outside Gartmore’s headquarters, following the departure of star fund manager Roger Guy, that number will further decrease. BlueCrest’s intention to liquidate its recently established onshore hedge fund makes further depressing reading.
Clients clearly need more funds to choose from, but despite the growth of the hedge funds industry, with money going to the biggest funds, they are getting less and less. Rather than diversifying portfolios, the danger is mounting of all clients being invested in exactly the same assets.
See Focus on Hedge funds of funds
For presentations from PWM’s recent sub-advisory summit, go to www.ftbusiness.com/eusubadvisory/presentations
