Managed accounts are a “fantastic tool” to increase liquidity of hedge fund strategies according to Amundi Asset Management’s head of product specialists and client servicing Franck Dargent.

Funds of hedge funds are still suffering from the aftermath of 2008, what Franck Dargent, a head of product specialists and client servicing at Amundi Asset Management, calls the "most demanding period" for the industry.

Dargent is a managing director at Amundi Alternative Investments, the hedge fund investment specialist of Amundi, the combination of the asset management businesses of Crédit Agricole and Société Générale. Amundi had over €700 billion ($996.8 billion) under management at March 31, 2011. Amundi AI manages $11.7 billion in funds of funds and a $2.2 billion managed accounts platform.

"There are a couple of lessons to be learnt from the financial crisis," said Dargent. Like others, he believes FoHFs need to stick to hedge fund strategies that are liquid and invest only in managers with strict stop/loss guidelines.

The increased demand for transparency from investors, said Dargent, is a sensible reaction to the crisis. He said investors want, and should be given, a better understanding of where returns are coming from as well as how risk allocations are made. For this he said the managed accounts platform provides a good way to manage risk and provide transparency. "The managed account platform gives a clear picture to our investors where their returns are coming from, performance attribution and how we can better understand the risks involved in the investments," said Dargent.

The shift by investors into single managers, according to Dargent, has been driven by the large sovereign wealth funds and pension houses that have the expertise internally to make their own investments. Although Dargent is seeing new demand from private banks, he cautions that not all of them undertake proper due diligence on the hedge funds in which they are investing. "We believe there are hidden risks if you do not take proper due diligence on the hedge funds," he said.

Dargent also said he believes FoHFs need to show investors they are earning the fees they charge for hedge fund manager selection and investment management. "People will discover that it's not obvious how to select the right manager, the right strategy. The environment is changing quickly and you need the [FoHF] portfolio manager to select the right names for the portfolio, to play with correlations, volatility, tail risk. This can be properly done at the FoHF level," he declared.

He is also seeing investor demand for more diverse solutions. In addition to the increase in reporting requirements from institutional investors, he said there is also more appetite for dedicated solutions.

"Most of our assets under management – I'd say around 80% – are through dedicated mandates and for each we provide dedicated services. So it's not only just a portfolio tailor-made for the investor, it is also a bespoke solution for the specific target returns, constraints in terms of volatility and de-correlation for each investor as well as taking into account the regulatory environment in which the investor is living," said Dargent.