Highly commended: Best high net worth/private client fund of hedge funds provider

Aberdeen Asset Management was born in 1983 because of a management buyout of the investment management contract for a small investment trust. Over the years the company has expanded through a combination of acquisitions and organic growth while keeping asset management as its sole business.

Solid client communication is the key to growing and sustaining assets, says fund manager Russell Barlow. He believes this is especially true following the financial crisis. This event had a profound impact on the hedge fund business and in particular the fund of hedge fund (FoHF) universe.

"Communicating to clients the commonality of problems caused by the post-Lehman liquidity squeeze has been the biggest challenge," he confesses. "We were able to communicate the large opportunity set that the market dislocations had presented while also re-affirming the strength of our due diligence and risk measurement functions. Clients that stuck with us enjoyed strong returns in 2009."

Assets under management (AUM) have grown to around £170 billion ($272.83 bilion). While the majority of that is in traditional assets - around 35% is in equities, 34% in fixed income and 13% in property - 18% of total AUM is in alternative investments.

The company has been managing FoHF portfolios for over 11 years. Its management team has an average of 15 years of investment industry experience.

The group oversees a diverse range of multi-strategy portfolios, some with a track record of over 10 years. One of the most successful of its products is the Orbita Capital Return Fund, a diversified portfolio that has been running since 1998 and has attracted $1.6 billion from Aberdeen's clients. Available in dollars, euros and sterling, the fund has delivered remarkably consistent returns producing an annualised performance of 6.31% with volatility of 5.29%.

The asset manager says such returns derive from the company's three core management principles. First, and an essential element, is selecting the best managers in a chosen field. Aberdeen Asset Management analyses factors including investment style, performance, volatility and infrastructure. It forms close working relationships with managers and monitors them continually.

Optimising allocation is also essential to deliver superior risk adjusted returns, believes the company. It is necessary to identify those strategies offering the greatest future opportunities and to understand fully their associated risks before allocation can be determined. The fund managers review their opinions continually and over time adjust allocations as a result.

The third tenet of successful returns is controlling risk. The fund does this using a proprietary combination of both quantitative and qualitative techniques. Manager diversification also has an important role to play in minimising risk and maximising stability from multiple sources of return.

The popularity of FoHF products is only likely to grow, Barlow believes. The asset manager hopes its experience in the sector will help it to be one of the beneficiaries for future growth and as investors start allocating once more to hedge funds.

"The existence of multi-manager products, be they in long-only or alternatives, points to the benefit of being able to select specialists in their fields rather than generalists," explains Barlow.

"Overall, the drive for transparency has led to the promotion of services such as managed accounts, but the industry is still re-finding its identity from the component parts of asset allocator, consultant and researcher. In the advisory/discretionary marketplace, different solutions will meet the differing needs of clients," he concludes.