You can’t swing a cat without hitting a Fof

Funds of private equity funds have resumed their place on the hit parade. As everybody and their brother has launched one this month. New Star Asset Management choose to make its first foray into the private equity market by launching a fund-of-funds called New Star Private Equity Investment Trust (NSPEIT), formed from the merger of August Equity Trust and the Rutland Trust.

And F&C Investments has held a first closing on its latest private equity funds of funds aimed the European mid-market, which expects to close before the end of the year. Finally, AGF Private Equity, the Paris-headquartered affiliate of AGF/Groupe Allianz, has launched its fifth offering to private equity investors through AGF Private Equity Holding V – Europe, a €350m fund of fund aimed at the European mid-market. Buy why have funds of funds become a popular vehicle again? Is it because they require less expertise and research making them cheaper to run?

It is most likely a case of if you can’t beat them join them. For some time now, those in the know have been forecasting the death of mutual funds, and mutual fund houses for that matter. As the traditional investor base of institutions is no longer willing to pay for beta, mutual fund houses join in the hunt for alpha. The fund of fund is the quickest solution to market.

Do you agree? Disagree? Contact me.