Aberdeen AM plans to double fund of hedge fund business

Aberdeen Asset Management aims to more than double the size of its fund of hedge funds business to $10bn within a few years, says the FT.

This ambition is despite investors’ growing preference for direct investment in hedge funds to cut fees. Nor have investors been impressed with the fund of funds sector’s recent performance.

Many funds of funds are still recovering from client redemptions since 2008, but they also face growing criticisms over their fee structures, as well as difficulties in reaching high watermarks.

But as the sector consolidates, so assets are increasingly being directed to the larger funds. Andrew McCaffery, global head of hedge funds at Aberdeen told FTfm: “There is going to be value to the size and scale of a firm. The largest managers are going for the biggest investment mandates, and we want to make sure we are competing with that upper echelon.”

“We have always been an acquisitive firm when we see an opportunity and we are looking at any number of ideas, but we are also looking at organically growing assets by winning new mandates,” he said.

Since the onset of the crisis, Aberdeen has been acquiring rival asset managers, including Bramdean Alternatives, a £35bn Credit Suisse long-only equity funds business and Royal Bank of Scotland’s asset management business.

Aberdeen’s hedge funds business manages just over $4bn in assets, and was launched in 2009 when it acquired a fund of funds business from Credit Suisse. The following year, Aberdeen took over Royal Bank of Scotland’s fund of hedge funds arm.

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