GLOBAL - Institutional investors are set to increase investments in hedge funds in 2011 but demand greater transparency and risk management from the industry, a study finds.
The survey by SEI found more than half (54%) of respondents said they planned to increase target allocations to hedge funds over the next year.
Three-quarters of respondents (75%) also said risk management infrastructure was "very important" in selecting hedge funds but this ranked second to clarity of a hedge fund's investment philosophy, with 79% deeming it very important.
SEI investment manager services division managing director Phil Masterson said: "The study confirms what we have been seeing and hearing from our clients - that investors are committed to hedge funds, but managers must get and keep investors comfortable with their investment decision.
"Managers must differentiate themselves through increased transparency, enhanced risk management, and reporting as well as better overall client service to gain and retain assets post-financial crisis and post-Madoff."
The study - Institutional Hedge Fund Investing Comes of Age: A New Perspective on the Road Ahead - found hedge fund transparency was a growing concern for investors such as pension funds, with 70% of those polled saying lack of transparency was their biggest worry. This was up from 56% in 2009.
The report also noted nearly one-third of respondents cited "limited regulation" as a primary concern of hedge fund investing.
"The hedge fund managers best equipped to compete prospectively will be those able to clearly articulate their value proposition and source of alpha, as well as demonstrate institutional-quality operations and risk management infrastructure," Masterson added.
A suite of liability driven investment (LDI) indices has been launched by STOXX and RiskFirst to aid trustees and consultants select, monitor and challenge managers.
British Airways and the trustees of one of its pension schemes are set to argue over the purpose of a pension scheme, leading to an impactful judgment for DB pensions. James Phillips explores the issue
Bank of England governor Mark Carney has said there is still a lot of data to consider before the Monetary Policy Committee (MPC) can decide when to next hike interest rates.
Savers are not squandering their tax-free lump sums under Freedom and Choice but are taking a more cautious approach to retirement, according to Prudential research.