Consultants and money managers are seeing a resurgence in interest for hedge fund-of-funds allocations across continental Europe and North America, but with a repositioning or enhancement of relationships.
Unlike previous surges of interest, sources said there are new motivations for searches, new demands from clients and different structures in place.
"They've been declared dead many times," said Toby Goodworth, London-based managing director, head of risk and diversifying strategies at consultant bfinance. "I started out in hedge funds in 2004 and I've seen it evolve quite significantly over that time."
Mr. Goodworth said over the past 12 months, there has been a "very substantial increase" in hedge fund-of-funds searches through Europe and North America, vs. the previous year. He declined to release exact numbers but said searches are more than 50% higher.
Consolidation and turnover in the market is a big driver, he said. "The fund-of-hedge-funds landscape has changed markedly the last few years with the closure of some smaller firms and mergers of smaller and midsized firms. Investors respond to that and in some cases may decide to re-tender."
Assets under management in commingled and customized fund-of-funds were largely flat at $414 billion as of June 30, 2017, vs. $416 billion a year earlier, according to Pensions & Investments' 2017 survey. Further, 61% of the managers reported growth in assets for the year ended June 30, 2017, with 29% reporting a decline. However, the number of hedge fund-of-funds managers that responded to the survey fell to 31 from 44 the year before.
Michael Turner, CEO at London-based Man FRM, said of the current period: "I would go so far to say (it is) maybe the busiest I can remember."
Mr. Turner said the firm, which had $17.5 billion in assets under management as of March 31 — up 20% year-on-year — is seeing less demand for the traditional commingled-type strategies of a decade ago, but there is "increasing demand for bespoke solutions for clients."
Requests range from tailoring an allocation to a specific requirement to building a managed account platform for an investor, he said. "We see a growing demand for our services, and it really is very much more focused on how can we help clients as opposed to taking something off the shelf."
Mr. Turner added that this surge in interest is global.