Funds of funds as a group have not recovered from the Madoff scandal and the 2008 crisis. A few large managers did better than the rest but many investors remain skeptical.
Among the better-placed fund of funds operators is Permal Group, which has a solid track record going back to the 1970s and access to the marketing network and other capabilities of its parent, $612 billion asset manager Legg Mason.
Still, Permal’s total assets continued to shrink due to losses in underlying hedge funds and redemptions over time. As of the end of September 2011, total assets under management were $20.7 billion. That is down from $25 billion two years ago and $35 billion pre-crisis.
Last June the Wall Street Journal reported that Citigroup’s private bank and Morgan Stanley Smith Barney warned investors about two Permal funds should a market crunch occur. The concern was whether the funds’ liquidity would be sufficient if a large number of redemptions came at once. Permal denied liquidity problems. Worries about fund of funds’ liquidity go back to 2008.
In one respect Permal proved itself in 2009—unlike many funds of funds, it had not invested with Bernard Madoff. Despite pressure from clients who favored Madoff, Permal decided not to invest after investigations raised questions about his strategy.
That and other advantages help against the headwinds faced by funds of funds. Permal is introducing new products via Legg Mason and last year acquired new institutional clients such as New York City pensions.
Tags: Citigroup, Legg Mason, Morgan Stanley Smith Barney, Permal Group, The Wall Street Journal
HedgeFundSmarts 
February 2, 2012 at 12:41 pm
[…] fund of funds managed by its subsidiary, Permal. Legg Mason’s extensive distribution network may help buck the general down trend in the fund of funds […]
May 17, 2012 at 4:06 pm
[…] about liquidity made investors nervous. Nevertheless, some large funds of funds, among them Permal, part of Legg Mason, have been trying to raise […]
August 1, 2012 at 5:48 pm
[…] at $17.3 billion a few months ago, way down from the $35 billion pre-crisis. A while back I asked whether Permal and Legg Mason can buck the downward trend in funds of funds. They are still working on […]
February 26, 2014 at 12:28 pm
[…] Like almost all funds of funds, Permal has had trouble raising money in recent years. But it has the advantage over freestanding funds of funds of being able to tap the distribution network and other r…. […]