By Craig Lewis, Head of Investment Consulting, CSPB
20 Million dollar advice
Overview
Ultra High Net Worth Investors (UHNWIs) always seem to be one step ahead of the general investing public. While most private banking clients have only been investing in hedge funds for the last few years, UHNWIs have been involved with hedge funds for decades, often creating their own investment vehicles via their family offices.
Most investors first venture into hedge fund investing is via a Fund of Funds (FoF) as they are attracted by diversification benefits and low correlations to classic asset classes. However, UHNWIs tend not to focus their attention on FoFs, as they perceive double fees to be too destructive to returns and pro forma track records to be designed for marketing brochures.
Via sophisticated family offices, their own contacts and partnerships with private banks, UHNWIs are able to access the hedge fund world, stripping out out-of-favour managers, focusing on certain hedge fund styles, and providing seed capital for fledgling operations. As founding investors, both UHNW investors and some financial institutions still have capacity at certain hedge funds that may be closed to new money.