When it comes to the funds-of-hedge-funds industry, it is becoming increasingly obvious that there is Blackstone Alternative Asset Management and then there is everyone else. Blackstone now manages $55 billion in assets, nearly $30 billion more than its closest competitor. It also accounts for more than ten percent of the total $539.6 billion managed by the world’s 50 largest such firms, according to our annual Fund of Funds 50 ranking.
Blackstone has flexed its significant balance sheet to branch out into areas far beyond traditional commingled fund-of-funds products — offering portfolio advisory services, co-investing alongside underlying managers, buying equity stakes in hedge fund firms and even launching a so-called liquid alternative fund. Other firms in the top ten have also redefined the traditional fund-of-fund role, which has proven crucial to their survival.
The industry, which managed a record $877 billion at the start of 2008, has yet to recover from the drubbing it took following the onset of the global financial crisis that year. And as the industry grows increasingly more complex, the costs of operating funds-of-funds businesses will continue to rise — all but ensuring that the biggest firms will continue to get bigger.
The data for the 2014 Fund of Funds 50 were gathered from questionnaires completed by the fund-of-hedge-funds firms themselves, research in the public record and extensive staff reporting. In some cases, we have included estimates based on our reporting. Only multimanager hedge fund portfolios are included in the capital figures. Assets are stated in millions of dollars and are current as of January 1, 2014 and January 2, 2013, unless otherwise noted. Returns are net of management and performance fees, as of December 31 of the relevant year.
Senior Research Editor Jane B. Kenney compiled this ranking with the assistance of Researcher Valentina McKenzie. Inevitably, we will have overlooked some institutions that belong on our list. If we missed yours, please send an e-mail to FoF50@iimagazine.com to request a questionnaire for the 2015 ranking.