Allocators say they will allocate to hedge funds again, but only to those that meet strict criteria.
Deutsche Bank Private Wealth Management, Société Générale Private Banking and EFG are among numerous rivals expressing preferences for onshore variants where suitable ones exist.
Taubert says: "There has been a strong slowdown in demand for any of the hedge funds, especially offshore-based strategies from our clients."
Superior liquidity is the primary advantage for most private bankers. Stephane de Vaulx, global head of alternative advisers at Société Générale Private Banking, says, if faced with equivalent onshore and offshore hedge funds, his clients opt for regulated ones.
Monchau adds: "Investors, when looking at hedge funds, are now focused on the return-risk-liquidity trinity. They are thus ready to give up some of the return they expect to earn for better liquidity terms.
"Since the crisis, private investors are showing some interest for Ucits hedge funds. We tend to favour Ucits funds when the regulatory framework of Ucits doesn't prevent the strategy to be fully deployed.
"Some strategies cannot be fully implemented within the Ucits framework. We therefore continue to include offshore hedge funds in our portfolios.
"Overall, we believe that Ucits hedge funds will continue to raise assets, but will not eclipse the offshore market."
Monchau says that hedge funds "and offshore ones in particular, have always been part of our absolute return discretionary mandates. Allocations vary between 10% and 20%. By allocating to hedge funds, we aim to diversify the risk of a global portfolio, without sacrificing returns."
For EFG's private banking clients, Monchau buys hedge strategies uncorrelated to global markets in most market conditions (market neutral, global macro and CTAs) and typically seeks monthly liquidity, sometimes accepting quarterly.
"Generally speaking, we seek to invest into the hedge funds that can clearly articulate their value proposition and source of alpha, and that have put in place high-quality infrastructure and operations."
The main way for hedge fund managers to win private bank allocations is to have an illiquid strategy not easily replicated within Ucits liquidity constraints, or to find funds of hedge funds that are, in turn, selected by private banks for those clients demanding offshore portfolios.
Deutsche Bank PWM selects funds of offshore hedge funds where requested. Société Générale Private Banking would selectively consider less liquid offshore structures, but for less liquid strategies.
Switzerland's SYZ Asset Management offers both funds of regulated and unregulated hedge funds.
Patrick Bédat, chief executive, says: "The main advantage of the hedge fund universe is its breadth and depth. With close to 10,000 hedge funds around the world, this universe is much larger than the Ucits one."
A simplistic comparison between offshore hedge funds and onshore Ucits "runs the danger of favouring form over substance", in his view.
"It is fundamental to distinguish between packaging/structure - whether it is an offshore hedge fund or an onshore Ucits vehicle - and substance, which means the success of the investment strategy," Bédat adds.
"Investors should beware a false sense of security that relies exclusively on the supervisory regime in place. There are risks in any investment.
"Regardless of the type of vehicle or supervisory regime, expertise and skill in assessing the specific attributes of each individual investment remain crucial."