The Morning Brief: Why Investors are Fleeing Funds of Funds

When Anthony Scaramucci unloaded a majority stake in his funds of funds business, SkyBridge Capital, he made it clear he did so to remove possible conflicts of interest now that he is joining the Trump administration. However, the timing was pretty convenient too. On Wednesday we were reminded that the struggling funds-of-funds business is in decline. Preqin reported that its benchmark hedge fund index enjoyed a 7.40 percent return in 2016, which Preqin declared the best performance year for the industry since 2013.

The average fund of funds, on the other hand, lost 0.25 percent last year, the worst performance since 2011, when the average fund of fund lost 3.98 percent. The three-year annualized gain for funds of funds amounted to a paltry 1.58 percent, while the five-year annualized gain was just 4.35 percent. Small wonder that the number of funds of funds is shrinking. HFR recently report there were 1,577 as of the end of the third quarter of 2016, down from 1,657 at the end of 2015 and about 36 percent fewer than the peak of 2,462 in 2007.


Bridgewater Associates founder Ray Dalio says populism is the biggest threat to the European Union. In an interview with CNBC, the head of the world’s largest hedge fund firm points to the successful Brexit vote, Donald Trump’s election as president of the United States and a failed referendum in Italy as examples of the growth of populism and its influence. “If you look at Europe as a whole and you’re going to say what is the greatest threat to the European Union? It’s not the debt crisis. It’s not central bank policy. It is the movement of populism,” Dalio said in the interview.


Hound Partners disclosed it owned 937,170 shares of SPS Commerce as of January 4. This works out to 5.5 percent of the provider of cloud-based supply chain management software.


Retired hedge fund honcho Tom Steyer promises to fight Donald Trump when he officially becomes president. The billionaire founder of Farallon Capital Management-cum-environmentalist, who spent at least $87 million on the 2016 election, plans to lobby Trump not to cut back on environmental regulations.

“If you ask me can I put a limit on how much I value the health, the safety, the employment and the civil liberties of Americans, there’s no limit to what I think that’s worth,” Steyer told Bloomberg. Most of his political spending is reportedly made through a number of groups called NextGen Climate.

Steyer is also working hard at opposing Trump’s cabinet selections. “We don’t know how much of their campaign rhetoric they’re going to try to put into action,” said Steyer. “But this is the most broad-based and dangerous attack on American values certainly that I have ever experienced in my lifetime and much more than I have ever imagined would happen while I’m alive.”

Steyer said he became very concerned about Trump’s selection of Rex Tillerson, the former chief executive of Exxon Mobil Corp., as secretary of state, and Scott Pruitt to head the Environmental Protection Agency.