1. billion dollar clubJiBlackstone tops lean and cleanfund of funds rankings Manager selection beyond the brand names with atwist of macro view is the winning cocktail for the futureIhe fund of funds industry, as represented byest fund of fund s in the world, with assets of $28.51 bil-{the largest players with more than $1 billion lion and a growth rate in the first six months of2.29%.in assets, is still a force to be reckoned with Blackstones fund of funds business, which is run bydespite the hostile asset raising environ-Tom Hill in New York, has been the largest discretionaryment and the challenging markets of 2010. independent fund of funds for at least a year, but HSBCThe once titanic trillion dollar fund of fundsAlternative Investments and UBS Global Asset Manage-industry has emerged as a leaner and clean- ment A&Qmix both advisory and discretionary, which iner group of savvier investors with $595 bil-the past have given larger overall totals. Yet, despite this,lion divided among 106 of the largest players.Blackstone has proven that pure fund management, rath-Reflecting the new maturity of the fund of funds indus- er than distribution, is the key to winning assets in 2010.try, where true performance is now rewarded with assets,In the fund of funds industry at least, successful mana-By J Viki discretionary managers, particularly independent firms, gers are those, like Blackstone, that are focusing on per-JVatarajanare enjoying a renaissance. As a statement of this trend, formance rather than asset gathering. For example, En-Blackstone Alternative Asset Management is now the larg-Trust Capital Diversified Fund, which is run by New28 September 2010 Invest Hedge

2. billion dollar club 28.5126.83 241122.9520.82 ~~ ll~~t~ntMan~e~ ~~n~t__________~1~9.0~0~ M o ~~stm IL- ~ __________________~~ 3 -1 17.5~ GAM Multi-Man er17.00 BlatkRockAltemaoye"MI=iso,_,rs . " 16 0--1 _ -==---i---==-1- -""-=-- "---- ---------"==.8" PaclficAitemative~."=rli"-Co,_.____ _ _, 0---i ----"= --i--= -+ --""-=--e16,.6"- Unlon Bancalre Prlvee16.10 12ior 1sset M15.03 = == =-""---------------------4"" 0 -1 1 .2"- 17.10 MI!SlrowAdvanced Strategies 12.40 Amundl Altematlve I nvestments 11.54 CrerlitSulsse 11.00 Aurora lnvestmEI!t ~lilnagement 9.65 K2 Advisors 8.71 FinancialR Mana ement isk8.63 P &Oeictet8.12 ArdEIIAsSeiM~ement7.94 Gottex Fund M~ - ement 7.64 The capital Holdings Funds/Edmond de Rothschildlirou 7,50 ElM7.407.40EII1EIIt7.307.20 FaucllierPartners7.03 SilverCreek Capital Mana&e~nt6.70==="--------------------" .Sc:_-1 3"- 33.49 = == = ==---- -- - - -- -----= 0--13.5"4.30="""-==~---------------=3,38----j"3.25 3.30 3.20 3.08 3.003.00 0.00%Pine liroveM5ociates 3.002.70liJl% Total 595.18(1) Total alternative assets including custody $33.211bn (2) Excluding GLG FOHF assets (3) The merged Citigroup and SkyBridge Assets (4) EACM Advisor and MGAI Assets under BNY brand (5) Now part of F&C Asset ManagementFootnotes: =Estimated numbers "= From latest SEC Listing " =31 March 2010B = entrants in 2010 old New Source: lnvestHedge lnvestHedge September 2010 29 3. billion dollar clubYork-based EnTrust Capital, was up 3.6% inly, while Irelands Abbey Capital, a managedJune, 33.77% for the past 12 months and 5.94% futures specialist, whose flagship was Jn-for the year to the end of June, the period overvestHedge Fund of Fund of the Year in 2008,which it also grew assets by 2.17%. Magnitude saw its assets grow by 42.9%.Capital, which has added 5% to its assets in six Looking at the Super League of funds ofmonths, is another good example of this (seefunds with $10 billion or more under manage-Profile, page 42).ment, independent discretionary funds suchFollowing the mass destruction of wealth in as Blackstone, Grosvenor Capital Manage-the past few years, the savvier fund of funds ment, BlackRocl< Alternative Advisors, Pacificmanagers are looking for opportunities in the Alternative Asset Management Company andrubble, such as the credit and distressed space Mesirow Advanced Strategies have all grownand in the structures they offer, including cus-in the first six months of 2010. That said,tomised accounts and co-investments, as wellGrosvenor, Goldman Sachs Asset Managementas harnessing the power of the managers inand Permal Investment Management havewhich they invest.each stayed at the same rank of fourth, fifthA powerful example of this is the gold shareand sixth, respectively. Union Bancaire Privee,class introduced by the Capital Holdings Group, Lyxor Investment Management and Man In-which has seen its assets under managementvestments, however, have fallen from the topgrow by $1.3 billion, equivalent to 21%. The10 to 11th, 12th, and 13th, respectively.Leveraged Capital Holdings G share class was The Super League, which is made up of justup 1% in June, 40% for the past 12 months and 16 funds of funds, houses half of the In-13.16% for the year to the end of June. vestHedge Billion Dollar FOHF Clubs assets,The InvestHedge Billion Dollar funds of while the top five largest firms with $20 bil-funds rankings may now only have 106 mem- lion or more in assets control $123 billion,bers, a third less in number and half of theequivalent to more than 20% of the In-assets than it had in our June 2008 survey, but vestHedge Billion Dollar FOHF Club.50 firms had positive growth in assets in theThis Super League group, which has $290first six months of the year. The 50 firms, billion under management, has lost $5.3 bil-equivalent to 47% of the universe with $334.3 lion in assets, equivalent to a loss of 1. 79% inbillion under management, added $24.7 bil-the first half of the year. The majority of thelion, or 7.97%. Taking into account the 11asset outflows can be attributed to bankfirms that had flat growth, 61 funds of funds backed funds of funds including UBS Globaladded $25.7 billion, equivalent to a growthfocus on discretionary portfolio managementAsset Management, which is now in thirdrate of 7.56%. for our existing clients but also now focusesplace after dominating the rankings since theOf this universe, 17%, or 18 fund manage-on customised solutions for clients who aresurvey started in 2002, and UBP, down fromment groups, posted asset growth of 10% or already invested in hedge funds or with new7th place.more, while 10 funds of funds, equivalent to capital to deploy." In April, Tarchon an- Despite UBPs efforts at overhauling the assetjust less than 10% of the universe of billionnounced the launch of the Tarchon Asia Fundmanagement business the Madoff legacy isdollar firms, recorded asset growth of 20% orand then the Tarchon Resources Fund, reflect-still taking its toll, which may explain a loss ofmore. The one striking feature of the June ing the firms view that both markets were $3.2 billion, equivalent to 16.6% of its assets.2010 survey is that there is only one new en-growth areas over the long term. Other bank-backed funds of funds that havetrant, and a re-entrant at that. Tarchon Capital A few other firms showed a stellar growth in seen asset outflows include Lyxor, Amundi Al-Management is not only the only new entrantassets, although BNY Mellon Asset Manage-ternative Investments and Credit Suisse.in the survey with total assets now at $1.41 ments asset growth of 41.9% can be attribut- The top five largest fund of hedge fundsbillion, but also the fastest grower with an as- ed to the merger ofEACM Advisors and Mellonfirms, however, grew by 1.33% adding $1.62set growth rate of 84.3%.Global Alternative Investments. The new totalbillion in the first six months of 2010. HSBC"Our growth through the first half of 2010 of $3.7 billion does not include the now al- Alternative Investments has grown at the fast-has been very pleasing given the hostile fundmost defunct Amaranth and Madoff-hit busi- est rate of 15.32% and added $3.56 billion, ac-raising environment, particularly in Europe,"ness of Ivy Asset Management, which is in thecounting for the largest growth, in dollarsaid Alberto Marolda, chief executive andprocess of being unwound. Derek Stewart andterms, of any other firm in the entire universechief investment officer ofTarchon. "We have Scott MacDonald, who joined BNY Mellon inof billion dollar funds.made significant improvements to our due 2001 and ran MGAI, are understood to have The boost to HSBCs business has taken it todiligence, portfolio and risk management left and formed their third fund of fundsthe second slot in terms of fund of hedge fundsprocesses over the past two years. The new in- thought to be called Carduus Capital.assets, although it has $33.21 billion in totalstitutional mandates we have been awardedAdvanced Portfolio Management in New alternative assets including those it has in cus-strongly support and validate the changes im-York and Chicago-based HFR Asset Manage- tody. HSBC is followed by Morgan Stanley, plemented. Our business model continues toment have grown by 40% and 41%, respective-which added $3.42 billion, an asset growth rateof 24.2% that has propelled it from 13th posi- tion to 7th in the rankings in just six months. The new inslilufionalnwndales 1ve have been mvardedOverall, the global billion dollar fund of hedge funds industry lost just $3.58 billion inslrong(v support and validale the changes implemented-- assets in the first six months of 2010, reflect- Alberto Moralda, Tarchon ing a drop of just 0.6%, roughly equivalent to the performance for the funds of funds indus-30 September 2010 lnvestHedge 4. billion dollar club- - -- - - - - - -- - - -- -- -- ...Asset growth: The Billion Dollar Club since December 2001200 2000 AUM ($bn} Number of firms1500150 z c"2.0 3 CJ"~Q:::;:!::;,~ ~