| Pension funds propel the institutional trend toward alternatives |
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| 11/07/2004 | |
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Institutional investors flocked to alternatives last year. As a direct consequence, funds of hedge funds saw a global 30 per cent increase by over US$41billion in assets under management in 2003, according to a new survey by Watson Wyatt. "The message of increasing diversity in pension funds assets to both reduce risk and increase returns is definitely getting through", said Nick Watts, European head of investment consulting at Watson Wyatt. "Increasing focus on risk in the pension fund and the source of that risk combined with the need to reduce deficits through increased returns have accelerated the trend towards investment in alternatives", he added. In every region, the greatest source of hedge fund assets gained was from institutions such as central banks, pension funds, supranationals, or governments, followed by about 20 per cent from high net worth individuals in Europe and North America respectively and 20 per cent from insurance companies in Asia. Pension funds leading In most of the cases, pension funds were the engine of the growth in alternative assets. They accounted for half of property fund assets in Europe and North America, and 35 per cent of property fund assets in Asia. This led to a rise of 13 per cent to over US$ 47 billion of property assets under management in 2003. The growth mainly came from pension funds, particularly in Europe, where property accounted for 65 per cent of new money. On the same note, pension funds made up more than 41 per cent of assets in private equity fund of funds in Europe, 27 per cent in Asia Pacific, and 35 per cent in North America, which led to an increase of 12 per cent to over US$16 billion of private equity fund of funds. Pension funds were however not the only one to provide new funds to private equity in all the regions of the world. Insurance companies indeed provided the majority of new funds in Europe (48 per cent) and in Asia (33 per cent), and only a little 7 per cent in North America. Julien Laplante |
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