Institutional hedge fund allocation growing rapidly
UK - Hedge funds continue to gain ground as an increasingly significant section of the global alternative investment industry, with a new survey revealing that institutional investor allocation in european funds of hedge funds is rising swiftly.
The review by Edhec group found that though high net worth investors still represented the main category of investors, institutional investor allocations were increasing rapidly.
These findings are corroborated by a recent report by Goldman Sachs International and Russell Investment Group which concluded that nearly 50% of schemes will invest in hedge funds by 2005.
The Edhec study said the growing importance of institutional investors was leading to a greater concentration on diversification rather than absolute return, a greater emphasis on benchmarking and a requirement for greater attention to be paid to operational risks.
“The increasing importance of institutional investors and their desire to protect themselves against operational risks is resulting in greater attention being paid to these types of risks, which represent the most significant source of hedge fund failures,” the report said.
The study however revealed that funds of hedge funds managing less than $200-$300m were finding it difficult to undertake a satisfactory operational due diligence both in terms of skills and economics.
Conducted over the second half of 2002 and supplemented by analysis and interviews during 2003, the survey took in 61 respondents together managing some e136bn at July 31, 2002.
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