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Infovest21 Annual Snapshot Survey of Funds of Funds: Asset size of average fund of funds increases, return expectations decline

Infovest21’s annual fund of funds survey provides a snapshot look at the typical funds of funds organization in today’s environment. Infovest21 conducted the survey in January and February 2012. Fifty-five funds of funds completed the survey. Of those, 64% were from the US, 31% were from the UK and Europe with the remainder from Japan, Asia and the Middle East. Highlights include: Return expectations Funds of funds have lower average return and volatility expectations in 2012 than 2011 and 2009. Their target return/volatility this year is 8.8%/5.8% compared with 11.8%/7.7% in 2011 and 11.1%/7.3% in 2009. Assets The average asset size of the fund of funds organization responding to the survey was $2.6 billion. The respondents said, on average, at least $1.6 billion is needed to “survive and thrive.” About 38% have seen an increase in assets under management while 38% have seen a decrease in assets from a year ago. Some interesting comparisons between this year’s survey and those conducted in 2011 and 2009. These include: The average asset size of funds of funds was larger in 2012 than the prior years in which the survey was conducted - $1.7 billion in 2011 and $1.2 billion in 2009. A higher percentage of the funds of funds had assets above $1 billion in 2012 compared with 2011 and 2009. Funds of funds placed a higher dollar amount on the threshold needed to “survive and thrive” in 2012 than they did in 2011 and 2009 - $1.6 billion versus $1.4 billion in 2011 and $1.2 billion in 2009. Underlying Managers and Portfolio Composition The average number of underlying managers is 47. The average fund of funds allocates 12.5% to small managers (less than $100 million in assets under management), 44.2% to medium-sized managers ($101 million to $999 million), 28.6% to large managers ($1 billion to $4 billion), and 14.5% to mega managers ($5 billion+). The most frequent change as cited by 30% of the funds of funds was adding more nimble managers. Another 28% said they offered more customized product and 28% said they became more institutionally client oriented. Investor Base The average number of investors decreased to 224 in 2012 from 334 in 2011. In 2009, funds of funds had an average 196 investors. High net worth/family offices make up about 45% of the average investor base while financial institutions comprise 22% and pensions 20%. Foundations, endowments and sovereign wealth funds account for the remainder. Compared with last year's survey results, this reflected an increase in financial institutions, pensions and endowments but a decrease in high net worth/family offices and sovereign wealth funds. The general geographic breakdown of funds of funds’ investors revealed an increase in European and UK investors between 2011 and 2012 with a decrease in US, Canadian, Asian, Middle Eastern, Australian and Japanese investors. Terms The average fee structure is a 1.1% management fee with a 6.9% performance fee. 80% said they haven’t changed their fees since last year. 7.5% said they lowered their management fee and 7.5% said they reduced their incentive fee. The 70 page report includes a comparison of survey results by funds of funds’ asset size, geographic location as well as a historical comparison.
Excerpt from just-released survey: Annual Snapshot View of Funds of Funds Report is approximately 70 pages including tables and graphs. Order your copy by calling 212-686-6440.