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Inside the $9.5bn global fund of funds universe

The vehicle type raised more equity last year than 2017 amid continuing stable performance for global and European-focused strategies, according to research by ANREV and INREV.

At least a fifth of institutional investors intend to increase or maintain their allocations to funds of funds over the next two years, a study by industry organizations ANREV and INREV has found, pointing towards a continued interest in the investment strategy.

In its Fund of Funds Study 2019 published in July, ANREV and INREV estimated that $9.5 billion in new equity was raised for funds of funds globally last year, up from $8.5 billion in 2017.

While funds of funds with European and global remits performed well last year, the Asia-Pacific funds of funds were an outlier, posting 1.8 percent returns in 2018 versus 12.8 percent in 2017.

Amélie Delaunay, ANREV’s director of research and professional standards, told PERE that the volatility in the APAC fund of funds performance could be attributed to currency fluctuations and a host of other factors. But she also noted that the funds of funds focused on the region accounted for a small proportion of the overall funds of funds universe, with the majority share taken up by those with a global investing remit.

“With the exception of 2013 to 2015, global strategies have had relatively stable high single-digit returns each year,” Delaunay explained. “Two reasons for this could be the geographical diversification that global strategies enjoy and their size. If one looks at the size of the funds, vehicles with a global strategy clearly dominate the funds of funds universe, together representing 89.3 percent of total NAV.”

Refer to the charts below for a detailed breakdown of fund of funds performance: