Swiss funds of hedge funds have been at the epicentre of various crises and industry scandals since 2008, but the largest players there still control one third of the money in the world's largest alternative multi-manager funds.
Swiss funds of hedge funds have been at the epicentre of various crises and industry scandals since 2008, but the largest players there still control one third of the money in the world’s largest alternative multi-manager funds.
According to a recent survey by Zurich University of Applied Sciences (ZHAW), Swiss FoHFs accounted for 30% of the $500bn managed by the world’s 50 largest funds of hedge funds providers.
The largest Swiss player, UBS, was in third place in the global league with $27bn assets, followed by Man in eleventh position with $12.9bn, and Union Bancaire Privée in thirteenth with $11.7bn assets.
They survey noted they had maintained control of about one third of the world’s largest funds of funds’ assets since the credit crunch.
But the outlook for the Swiss funds of funds industry overall – along with that for the broader global industry – is not so certain.
Genevan private bank Banque Privée Edmond de Rothschild may be the largest Swiss-registered FoHF with 36% of all assets in Swiss-registered FoHFs, but it is also the only Swiss-registered fund of hedge funds provider that has managed to grow its assets from 2009 onwards, according to the research.
The domestic FoHF community’s assets under management have been dropping steadily since mid-2007, the beginning of the global credit crunch.
All of the top 10 Swiss registered fund of hedge funds providers have suffered a drop in their assets since 2007.
Switzerland is, of course, not alone in suffering this. Global FoHF assets have shrunk by 40% since their peak in 2007, and according to recent global research from US data provider eVestment/HFN, the number of FoHFs has dropped from nearly 3750 in mid-2007 to about 2300 by this July.
But some Swiss FoHF providers were made to sweat particularly hard back in late 2008 when the unwanted media spotlight shone on them – a number of the most prominent names were being revealed as victims of the Ponzi scheme of Bernard Madoff.
As the US hedge fund fraudster was led to court, Swiss funds of funds named as suffering losses in the scandal included Man Group’s RMF unit, UBP, Banco Santander SA’s Optimal Investment Services and Notz, Stucki & Cie.
Various Swiss private banks also suffered, but below the media radar, as sharp redemptions followed.
Between Madoff’s arrest in December 2008 and October 2010, data providers Eurekahedge calculated aggregate money invested in more than 180 Geneva-based funds of hedge funds fell by 60% to $14.8bn.
The total assets of local Swiss FoHF providers have shrunk by another 10% in the first half of this year, even though the aftershocks of Madoff have well and truly receded. The recent downsizing has been driven exclusively by outflows from the industry, especially this April, according to Swiss data source Hedgegate.
Just two locally registered providers – Banque Privee Edmond de Rothschild and HSBC Private Bank (Suisse)- now hold over half of all the money in Swiss-registered FoHFs.
But even tough times hitting, and assets in Swiss FoHFs consolidating in the hands of the few, have not stopped new managers launching products.
The number of active FoHFs in Switzerland has grown from 371 to 515 between December 2007 and this June, according to Hedgegate.
Most of this increase in the number of funds can be attributed to a growing number of funds of hedge funds for qualified investors, which cannot be publically distributed in Switzerland.