Institutional investors are taking a more direct approach than ever in their allocations to hedge fund strategies, according to a survey by the Alternative Investment Management Association (AIMA) and Barclays.
The survey questioned 30 major asset owners with a total of $2 trillion under management. Two-thirds of these said they had been involved in some kind of partnership with a hedge fund.
These partnerships varied from the provision of consultancy and advice services to co-investments, bespoke mandates, and product seeding. The report also cited lower fees and better value as incentives for such arrangements.
Michelle McGregor-Smith, CEO of British Airways Pension Investment Management and chair of AIMA’s Investor Steering Committee, said the findings reflected the “institutionalisation” of the hedge fund sector, whereby pension funds, endowments, and sovereign wealth funds have superseded individual high-net-worth investors as the main owners of hedge funds.
The report stated: “Hedge fund investors have become increasingly sophisticated in their view of their investments, looking at hedge funds as a way to tailor the risk-return of their entire portfolio and, simultaneously, they have concentrated their portfolios to a smaller number of managers. As such, they are looking to have fewer but more meaningful relationships.”
The survey, titled “The Extra Mile: Partnerships between Hedge Funds and Investors”, is available here.
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