Investable hedge funds indices were given the thumbs down by a senior industry figure at the recent Funds Forum conference in Monaco.
Stanley Fink, chief executive of MAN Group, which has $42bn (€34bn) of hedge fund assets under management, criticised the development of investable hedge funds indices and regarded them as a wrong for the industry.
“We think they are a mistake for the hedge fund industry because all the indexed products we see significantly underperform the non-investable indices,” he told the annual Fund Forum conference.
An investable hedge fund index “tends to be more about negative selection, made up of wannabes and has-beens that that are prepared to put up with the transparency and liquidity of being in an index”.
Looking at the future of hedge funds, Fink said that if they continued to grow in the way they had, he could see total assets rise from $1-3trn in the next seven years or so.
Research by his firm showed that the top 180 managers, accounting for just 10% of the managers in the business, looked after some 65% of the assets.
Looking at the growth of the institutional investors into hedge funds, he predicted that they would move from fund of funds to single manager and multi-strategy funds. Fink even saw some institutions running their own hedge funds.
On the sidelines of the conference, Kevin Pilarski of Dow Jones Indices in Chicago, was unable to comment on Fink’s remarks as he had not been present.
But he told IPE that investors in some investable indices may not realise that part of the invested funds can come from the funds of funds community using the indices to obtain market exposure before allocating it to managers.
Dow Jones does not allow this short-term money into its investable hedge fund product. This product has attracted $1.6bn in assets, he said.