Some 38% of pension schemes say high management fees are an obstacle to investing in hedge funds, research from the Asset Management Exchange (AMX) has found.
A similar portion (32%) cited insufficient risk reporting, while just over a quarter blamed "difficulty of comparing fund performance". Meanwhile, one quarter cited inability to govern individual funds as an obstacle. The same study found that some respondents were expecting increased scrutiny from pension schemes on a range of hedge fund specifics.
The findings come from a survey of 200 individuals with pension scheme investment responsibilities, conducted in April, which also revealed they expected higher scrutiny on hedge fund characteristics.
Some 41% said they expected additional analysis on fees paid, 40% said costs incurred, 36% said the security of assets, and 30% wanted this for net returns generated. Meanwhile, increased scrutiny on current risks and overall risks was called for by 31% apiece.
AMX global head Oliver Jaegemann said, with pressure to reduce costs in the industry, many pension funds may naturally steer away from hedge funds because of high management fees.
He said: "By increasing transparency surrounding costs and fees, and streamlining these to increase cost efficiency, we believe we can encourage pension decision makers to consider investing in hedge funds - giving these pension schemes access to a wider range of options and opportunities."
He added security and risk are also key areas of concern when it comes to investing in hedge funds, and need to be "rapidly addressed" to provide decision makers with confidence to invest.
"By providing increased transparency across all stages of the investment process as well as additional risk oversight and an enhanced view of risk exposure, we are well placed to ease these concerns and help to facilitate greater investment in hedge funds."
In the year to March 2017, however, use of hedge funds by defined benefit schemes increased by 10 basis points, with an aggregate allocation of 6.7% - more than four times its size in 2006 - according to the Pension Protection Fund's annual Purple Book.
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