A classification used by the financial services industry to denote an individual or a family with high net worth. Although there is no precise definition of how rich somebody must be to fit into this category, high net worth is generally quoted in terms of liquid assets over a certain figure. The exact amount differs by financial institution and region. The categorization is relevant because high net worth individuals generally qualify for separately managed investment accounts instead of regular mutual funds.The most commonly quoted figure for membership in the high net worth "club" is $1 million in liquid financial assets. An investor with less than $1 million but more
than $100,000 is considered to be "affluent", or perhaps even "sub-HNWI". The upper end of HNWI is around $5 million, at which point the client is then referred to as
"very HNWI". More than $50 million in wealth classifies a person as "ultra HNWI".
HNWIs are in high demand by private wealth managers. The more money a person has, the more work it takes to maintain and preserve those assets. These individuals generally demand (and can justify) personalized services in investment management, estate planning, tax planning, and so on.
High net worth individual
In private banking, a high-net-worth individual (HNWI) is a person with a high net worth. Typically these individuals are defined as having investable assets(financial assets not including primary residence) in excess of US$1 million. [1][2] The number of high net worth individuals worldwide is estimated at 9.5 million. HNWI wealth totals US$37.2 trillion, representing an 11.4% gain since 2005.[1]
UHNWI
Banking and Finance
Retail
UHNWI refers to Ultra-High-Net-Worth Individuals, individuals or families who have at least US$30 million[1][2] in investable assets. The number of ultra high net worth individuals worldwide is estimated at about 95,000.[1] The exact dividing lines depend on how a bank wishes to segment its market; for example, the term Very High Net Worth Individuals [3] can refer to those with assets between $5 million and $50 million, with Ultra High Net Worth Individuals only those with above $50 million.
Banking and Finance
Most global banks, such as Credit Suisse, Deutsche Bank or UBS, have a separate Business Unit with designated teams consisting of client advisors and product specialists exclusively for UHNWI. Because of their extreme high net worth and the way their assets were generated, these clients are often considered to have semi-institutional or institutional like characteristics.
Retail
Brands in various sectors, such as Bentley, Maybach and Rolls-Royce in motoring, actively target UHNWI and HNWI to sell their products. Figures gathered by Rolls-Royce suggest there are 80,000 people in the UHNWI category around the world.[4] They have, on average, eight cars and three or four homes. Three-quarters own a jet aircraft and most have a yacht.Source: Wikipedia
High Net Worth Investors. Due Diligence For High Net Worth Investors
I just found a resource on conducting hedge fund due diligence for high net worth portfolios. It is not a complete guide to conducting this type of due diligence but I think they brought up many good points within this article. A hedge fund investment should be utilized to improve the efficient frontier of an accredited investor’s portfolio and protect against downside risk by the allocation of a segment of the portfolio appropriate to the client’s risk tolerance. Both quantitative and qualitative due diligence are essential to protect a client’s investment against fraud, divergence from stated strategy, and/or poor investing.
A fund of hedge funds investment can offer diversification, and innate due diligence, within the hedge fund investment by limiting the allocation that any single fund can hold. A fund of funds downside comes from the layering of fees and the more apparent lack of transparency that’s prevalent with many funds. In addition, the preeminent hedge funds are often hard to locate because they are often available by referral only.
The correlation of a hedge fund with traditional benchmarks is a vital component in due diligence. One must also be aware that although stated pre-tax returns of a fund may be appealing, short-term trading can destroy the tax efficiency which is critical to high net worth investors. Research into the operation of the hedge fund manager and their performance in varying markets and well as tactical ongoing analysis of the fund’s performance are imperative to quality due diligence.
Hedge Fund Due Diligence
Hedge Fund Due Diligence Guide
New hedge funds are launched daily, which is constantly increasing the importance of conducting formal hedge fund due diligence and determining which hedge funds are appropriate for you or your firm to invest in becomes increasingly important. Every person or company is going to have different investment horizons, risk tolerances, strategy preferences, etc. so it is usually more valuable to know the basics of how to evaluate a hedge fund then it is to hear someone say which hedge funds are "the best." I think giving hedge fund recommendations even to the degree of suggesting exactly how to evaluate a hedge fund is too close to finance advice to put online but the SEC website does provide this advice in conducting a minimum level of hedge fund due diligence before investing:
Read a fund's prospectus or offering memorandum and related materials
Understand how a fund's assets are valued
Ask questions about fees
Understand any limitations on your right to redeem your shares
Research the backgrounds of hedge fund managers
Don't be afraid to ask questions
Hedge Funds Due Diligence Articles, Guides & Tools
I have been collecting the hedge fund due diligence resources below over the past 18 months and I'm posting them here in hopes that they will a few people construct a relatively holistic view of what hedge fund due diligence is about along with provide a few example RFPs and tools to use while conducting due diligence on hedge fund managers. This is not an exhaustive list and the information anywhere on this blog or within the linked sites should not be treated as investment advice or a substitute for financial advice of any type. This is simply an aggregation of online hedge fund due diligence resources. I have only listed 21 resources here so far, I hope to make this more robust, if you have something you think should be added here please email me at Richard@RichardCWilson.com.
Hedge Fund Due Diligence Articles
Hedge Fund Regulation Corner Compliance & Law Notes
SEC on Hedge Fund Regulation
Hedge Fund Risk Analysis
Hedge Fund Fraud SEC & Hedge Funds Fraud Case
Hedge Fund Due Diligence Tips
The Importance of RFPs in conducting hedge fund due diligence
Hedge Fund Manager Due Diligence
Due Diligence for High Net Worth Clients
Investment Due Diligence
Risks of hedge fund investing & portfolio management
How long should hedge fund due diligence take?
Institutional Hedge Fund Risk Controls
Hedge Fund Due Diligence Questions
Importance of transparency and hedge fund due diligence
Hedge Fund Due Diligence Whitepapers & PowerPoints
Whitepaper on Hedge Fund Operational Risk & Transparency
Alpha through rigorous hedge fund due diligence
In-depth hedge fund risk & due diligence PowerPoint
White Paper on Mitigating Operational Risk During Hedge Fund Due Diligence
Hedge Fund Due Diligence Tools
FINRA Broker Check
Hedge Fund of Fund RFP Example - Used in Institutional Due Diligence Processes
HFN's Guide to Hedge Fund Due Diligence
Book on Hedge Fund Due Diligence
Fund of Fund Due Diligence
- Richard
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Additional Hedge Fund Guide Sections
Hedge Fund Strategy
Hedge Fund Marketing
Hedge Fund Terms
Articles Related to "Hedge Fund Due Diligence"
1. Guide to Investing
2. Hedge Fund Risk Management
3. Hedge Funds FAQ
4. Request for Proposal
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Hedge Fund Strategy
Hedge Funds Strategy Guide
The 10-15,000 hedge funds now being managed throughout the world use between 200-400 different hedge fund strategies. How can you keep these all straight? The short answer is you can't, but I have started compilining a list of hedge fund strategy definitions here below. Let me know if you are looking for something and can't find it here.
Hedge Fund Strategy Explanations
Emerging Markets
Equity Long Short
Fixed Income Arbitrage Investment Strategy 1 Page Guide
130/30 Hedge Fund Resources
Global Macro
Global Macro Hedge Funds
Multi Strategy Hedge Fund
Sustainable Investing
Event Driven Hedge Funds
Green Hedge Funds
Art Investment Strategy
African Hedge Funds
130/30 Hedge Funds See Rapid Growth
Top 5 Hedge Fund Strategies
Hedge Fund Investment Strategies
Litigation Funding Hedge Fund Strategy
Short Selling
Emerging Markets Hedge Funds
Risk Arbitrage Hedge Fund Strategy
Hedge Fund Litigation Funding List
Warrant Arbitrage
Arbitrage Investment Strategy
- Richard
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Hedge Fund Terms
Hedge Fund Marketing
Hedge Fund Due Diligence
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Fund of Hedge Funds Fund of Hedge Funds Update
There has been a lot of talk over the last 2 years and 2 quarters particularly about the death of fund of hedge funds (fofs). Like much other doomsday discussions regarding the hedge funds I don't see these fund of fund groups going anywhere. In fact, I still think there is room for further growth in the fund of fund arena as demand from internationally-based investors is increasing as most fund of funds are still currently designed for U.S or EU investors.
The main reason why I think hedge fund of funds will be always be around is that many investors have just enough assets to play around in hedge funds. This requires them to either allocate their funds to a friend or close business partner who runs a single strategy fund or diversify their entry to the hedge fund market by investing in 3-12 hedge funds at one time. Some of the most popular retail products these days are all in one portfolios whether they be lifestyle portfolios, all cap separate managed account products, or retirement focussed growth & income mutual funds. Many investors would rather pay an extra layer of 1% fees in return for a no hassles lower risk exposure to the hedge fund industry.
Another reason why fund of hedge funds will be around for a long time is that 55% of all fof assets are from institutions. The percentage of fund of funds used in a institutions total portfolio is on the rise, not the decline. This class of investors generally takes a longer view than high net worth individuals or family offices. It would take several catastrophic events in consecutive quarters or years to stall or create a small decline in the institutional use of hedge fund of funds.
Read dozens of additional articles like this within the guide to Hedge Fund Terms and Definitions.
- Richard Fund of Hedge Funds
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Hedge Funds
Related Terms: Fund of Hedge Funds, FoF, Hedge Fund of Fund, Hedge Fund of Funds, Fund of Hedge Funds, Hedge Fund Portfolio, Portfolio of Hedge Funds, fund of funds hedge funds, fund of funds hedge fund, a hedge fund of funds, funds of hedge funds portfolio, top hedge fund of funds, best fund of hedge funds, top fund of hedge funds, best hedge fund of funds, fof, fund of hedge fund managers, fund of hedge funds
Below are a collection of useful and interesting news pieces, articles and videos related to hedge funds:
Link 1: Assets of a Brazilian hedge fund sharply drops: Ciano Investimentos Gestao de Recursos Ltda.‘s flagship hedge fund lost 95 percent of its assets to withdrawals after founder Ilan Goldfajn, a former central bank director, left the company.
Investors withdrew 197.4 million reais ($85 million) Ciano 60 Hedge Fundo de Investimento Multimercado since Nov. 11, a day after Goldfajn departed. The fund’s value plunged to 10.3 million reais as of Nov. 21, according to the Web site of Brazil’s securities regulator, CVM.
“Some investors withdrew funds because of my decision to leave Ciano,” Goldfajn, 42, said in a telephone interview from Rio de Janeiro. “Because of my departure, we waived a 10 percent redemption fee.” Source
Link 2: Hedge Funds Search for Assets in Japan
Japan's Ashiya city has been home to the nation's industrial titans since samurai ruled the land more than a century ago. Now it's a feeding ground for hedge funds tapping the wealth of new multi-millionaires like Kunihisa Sagami.
Sagami, founder of mail-order cosmetics and jewelry supplier Epix, is one of the residents of the gated enclave overlooking the port city of Kobe who are among the highest taxpayers in Japan. They're the elite in a nation where households hold a combined $15 trillion in financial assets -- more than the annual gross domestic product of the U.S. Source
Link 3: Texas Hedge Fund Being Liquidated
Parkcentral Capital Management, an investment firm that manages money for the family of Ross Perot, is liquidating a fixed-income hedge fund because it is “no longer viable.”
This year through October, Parkcentral Global Hub’s assets fell as much as 40 percent, to $1.5 billion. The fund is selling its remaining holdings to pay creditors, Eddie Reeves, a spokesman, said Tuesday. Mr. Perot and members of his family were the fund’s biggest investors.
“Parkcentral Global has been impacted dramatically by the unprecedented upheaval of the capital markets in general and the freezing of credit markets in particular,” Mr. Reeves said. ”The fund is no longer viable.” Source
Link 4: Spitzer's wife to join a hedge fund
The wife of former New York Gov. (and Sheriff of Wall Street) Eliot Spitzer is going to work on Wall Street.
Silda Wall Spitzer, who endured the humiliation of her husband’s resignation amidst a prostitution scandal in March, has joined hedge fund Metropolitan Capital Advisors (which is technically on Madison Avenue), New York Magazine reports. The $300 million firm is run by CNBC personality Karen Finerman, whose husband, Lawrence Golub, is a longtime friend of Eliot Spitzer and contributor to his campaigns.
Silda Spitzer will help “recruit new investors” in her new job, which she started last month. Source
Link 5: Hedge Fund Pacificor Sued
Pacificor has been sued by the former owners of a mortgage lender the California hedge fund bought.
John and Kitty Gaiser have sued the Santa Barbara-based firm and the estate of its former manager, Michael Klein, seeking $30 million. The Gaisers’ lawsuit says that Pacificor “misused a position of trust and control in order to attempt to take control of and acquire—without compensation—John and Kitty Gaiser’s ownership of Quality Home Loans,” the Gaisers’ law firm said in a statement. Source
Link 6: Hedge fund assets stuck within Lehman
Several companies reliant on four US hedge funds face collapse because the funds cannot access shares and loans held at the London arm of Lehman Brothers, the collapsed bank.
The four funds – whose names were kept secret in a High Court ruling this week – claimed that they were likely to close in mid-December if they failed to get access to information about their assets frozen at Lehman. The funds made an unsuccessful effort to force the administrators of Lehman, four PwC partners, to give them details of their assets and how much they owe to Lehman. Source
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GLG Partners Hedge Fund Update
GLG Partners Fund
GLG Partners Hedge Fund Update
Just a quick note to let you know that our team has updated the Hedge Fund Tracker notes for GLG Partners.
To read the updated profiles see this link: GLG Partners Hedge Fund Tracker Profile Notes
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Top 4 Hedge Fund Industry Fears Market Insights
Hedge Fund Fears
The Top 4 Hedge Fund Fears
Over the last 3 months and a series of conversations with hedge fund managers, prime brokerage professionals, administrators and marketers it seems there are 4 big fears in the industry right now.
Top 4 Hedge Fund Fears
A flat or highly volatile market for a period of more than 18-24 months - effectively wiping out those hedge funds which were hanging on for those greener pastures of another bull market.
Long-term deterioration of leverage of almost any type. While many hedge funds already use no or close to no leverage many others use large amounts of it and many funds would be hampered if new regulations are put into place which severely limit their access to it. Read an article on this topic here.
Desperate hedge fund managers committing enough fraud to scare off a large percentage of the High net worth and ultra high net worth investor base. There is article on my site on ethics located here.
Overbearing regulation which pushes hedge fund activity into Canada, over to London and across the world away from New York. The industry is already suffering large redemption losses and regulation done the wrong way could stifle further innovation or at least push even more of it offshore. As the recently hedge fund testimony showed, many hedge funds are open to some forms of regulation or over-sight but these must be done in ways which are sensitive to the intellectual knowledge and security disclosure concerns specific to this industry. Listen to the recent congressional testimony by hedge fund managers by clicking here.
Other interesting points that have come out of talking to hedge funds - most expect the markets to stay flat or negative for an additional 6-9 months and the majority see this to be a huge opportunity for positioning their fund for explosive growth in 2010 and 2011.
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Managers Hedging Skills
Japanese Hedge Funds
Japanese Hedge Fund Managers Notes
It would seem that choppy markets in Japan over the past several years is now helping hedge funds in this region navigate the current financial crisis. Most of the funds I know which run funds focusing on Japanese securities also run diversified Asia or China funds which have done very poorly, I would be curious to see if those managers who run both Japan-specific funds as well as China funds faired better than the average fund in China. Here is the article excerpt:
Japan's hedge fund industry, dominated by so-called long-short funds that bet on rising and falling stock prices, will attract capital on signs they are starting to outperform peers, Credit Suisse Group AG said.
The 81-fund Eurekahedge Japan Long-Short Equities Index fell 11 percent this year through October, compared with a 21 percent drop for an index that tracks more than 1,000 global long-short hedge funds and a 40 percent slide by the MSCI World Index, a global benchmark.
``Japanese long-short strategies have weathered reasonably well the market turmoil,'' Boris Arabadjiev, head of alpha strategies at Zurich-based Credit Suisse's asset management unit, said in an interview in Tokyo yesterday. ``That relative performance has already started to attract capital, and we believe that it will continue to attract capital. We continue to be favorably disposed to managers investing in Japan.''
This year has been the worst on record for hedge funds, an estimated $1.56 trillion industry, with the average fund losing 16 percent through October, according to data compiled by Chicago-based Hedge Fund Research Inc. The industry saw net withdrawals of $62.7 billion in October, according to Eurekahedge Pte., a Singapore-based industry data provider. Read more...
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