By Kris Chikelue
A persistent view exists that the fund of funds industry is on a steady but inevitable decline. I agree that the industry is currently purging. The purging process will be painful and last as long as investor bullishness stays low. How will this purge play out? A growing consensus is that large funds of funds will attract a dominant portion of capital flows while small funds of funds will either be acquired or compelled to offer specialized products. Let me offer a slightly different perspective on a potential future for small funds of funds
There are multiple prisms in which to view how small funds of funds must evolve. The impacts of technology and regulation are relevant; the development of new products that compete directly with funds of funds is also important. For now I choose to focus on one factor: the future demands of those who...