WILMINGTON, Del. (HedgeWorld.com)--Administering registered hedge funds, a relatively new area, has become a fast growing business. One big player is PFPC Inc., a provider of services to US$1.3 trillion in mostly mutual fund assets.
"Registered hedge funds combine many of the advantages of both mutual funds and hedge funds," said Fred Jacobs, PFPC senior vice president for global business development. "This is a worldwide trend, as the mass affluent become increasingly interested in hedge funds."
Retail hedge funds are becoming available not only in the United States, but in other markets like Hong Kong and Singapore. As these hybrid products proliferate, established administrators like PFPC are combining experience they acquired from mutual funds with their alternative investment practice. Among the organizational capabilities they need for this purpose are an ability to communicate with large numbers of shareholders and expertise in meeting various regulatory requirements. For example, there is a custody requirement and a fund accounting requirement. "You need to understand hedge funds and you need to understand mutual funds," said Mr. Jacobs. "It is a unique combination." PFPC, which administers US$17.8 billion in hedge fund assets globally, went into servicing registered hedge funds when these were first introduced six to seven years ago. But there were only two managers back than, Mr. Jacobs remembers: PaineWebber and CIBC Oppenheimer. In the past couple of years, numerous managers and banks have entered the field, registering series of hedge funds of funds with the Securities and Exchange Commission.
PFPC recently became the administrator of a Phoenix-LJH Advisors fund of funds that was filed with the SEC last summer but has not yet started operations. Phoenix Investment Partners, a subsidiary of Phoenix Cos, will distribute the fund while LJH Global Investments, a Naples, Fla.-based hedge funds of funds firm, manages the portfolio.
"We're excited about the relationships we are building with firms like Phoenix and LJH," Mr. Jacobs said. There may be more such products coming from these managers--fueling the growth of this niche for PFPC and other administrators.