US/CANADA - Searches for hedge fund managers and inflation-hedging strategies among North American institutions will dominate search activity in 2011, a new survey of consultants finds.
A survey by eVestment Alliance and investment manager consulting firm Casey Quirk & Associates found consultants expected most searches to centre on hedge funds. The asset class has moved up the ranks one notch from 2010 and is up from fourth place in the 2009 survey. The firms canvassed opinions from 55 consultants in the US and Canada with over $10trn in assets under advisement.
The consultants said one shift in hedge fund investing from 2010 is a greater desire for direct investments.
"Most North American institutional investors selected a core fund of hedge funds in recent years, and few are yet convinced they need a change. Second, and more importantly, larger investors now seek more specialized FOHF (fund of hedge funds) strategies in place of, or in addition to, a diversified FOHF mandate. Finally, larger institutional investors-particularly well-funded non-profit funds-still seek to avoid higher fees and pooled vehicles offered by FOHFs," the report said.
Consultants also expect a jump in demand for unlisted investments driven by inflations and longevity fears. This will drive searches for real estate and private equity managers.
"One of the more interesting findings in this year's consultant survey is the rising interest in private equity and real assets," said Casey Quirk partner Yariv Itah. "Institutional investors increasingly manage toward outcomes rather than just excess return, and they want asset managers who can use illiquid investments to mitigate inflation risk and manage liabilities."
Other notable changes include an increase in demand for more specialist emerging markets debt and equity managers and a reduced interest in core and core-plus fixed income.
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