In a sign of the blurring boundaries between traditional “long-only” investing and alternative structures such as hedge funds, data provider eVestment is to buy PerTrac and Fundspire, two specialists in hedge fund data and analysis.
“The overriding theme is convergence,” said Jim Minnick, co-founder and chief executive of eVestment, “that shift of the market place starting to allocate to more alternatives, the world is just becoming much more of a transparent and open place for investment.”
The Atlanta-based eVestment is a specialist provider of data and cloud-based technology services, which has focused for 13 years on the traditional side of asset management, providing services mainly to the consultants that advise institutional investors such as pension funds, and the traditional money management companies.
The acquisitions point to the increasing use of passive investment products such as exchange traded funds, which are eating into the market for actively managed stock funds, while investors are turning to hedge funds that have been forced to become more transparent and professional in response.
New York-based PerTrac provides services to investors such as endowments, family offices and fund of funds. It is one of the main providers of information on the hedge fund industry.
Fundspire offers cloud-based technology to the alternative investment industry, an area of growth as investors demand up-to-the-minute analysis and reporting from their money managers.
Terms were not disclosed for either transaction.
The move comes as institutions attempt to address the challenge of underfunding and a low interest rate environment by searching for investments that will not simply follow stock markets, leading them to allocate capital to big, established hedge funds.
In the first half of 2012, investors favoured the largest funds: the “billion dollar club” of single-manager hedge funds, which oversee more than $1bn saw assets under management increase to $1.15tn from $1.08tn at the end of 2011, representing more than 60 per cent of all hedge fund assets, according to PerTrac.
At the same time, the returns and fees of hedge funds are coming under greater scrutiny, as the average investment in a hedge fund is on track to be beaten by a simple passive portfolio held 60 per cent in stocks and 40 per cent in bonds for the 10th year in a row.
Alternative asset managers such as AQR, the quantitative investment company, and buy-out group KKR have begun to seek capital from retail investors in traditional mutual funds. Cliff Asness, co-founder of AQR has questioned fee levels at funds that offer exposure to a simple strategy, such as arbitraging convertible bonds, without adding much additional profit, or “investment alpha”.