| Survey shows hedge funds not that hot |
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| 26/11/2006 | |
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The headlong rush into hedge funds has not yet happened. European institutional investors have barely increased their exposure to hedge funds, according to a new report. The one exception is France where institutional investors invest 5.3% of their assets in hedge funds, compared to a 2% average for the continent, notes Invesco. Nearly two-thirds of those surveyed are not investing in hedge funds and only 7% see their hedge fund exposure increasing by more than 2%, far less than the proportion of those who intend to allocate to equities, bonds and real estate. In fact, real estate is the only alternative asset class that has experienced robust growth from 2005 to 2006. "Hedge funds, private equity and commodities remain marginal," says Yves Van Langehove, head of institutional sales at Invesco. "The growth is lower than expected." The study, which surveyed 90 European institutions with €311 billion in assets under management, notes that the proportion of assets across private equity, hedge funds and commodities was 2.2% on average, compared to 1.5% in 2005. In France, hedge fund assets grew to 5.3% in 2006 from 2.7% in 2005. Hedge fund assets in Italy and Germany were 1.6% and .9% respectively in 2006. The average for all countries, including Benelux, was 1.9%. More popular is real estate Hedge fund assets were the most popular among smaller institutions surveyed. "What is becoming increasingly clear is that hedge fund assets used by pension funds and insurance companies remain low," notes the study. Mr. Langenhove points out 84% of those investing in hedge funds do so through fund-of-funds for diversification purposes, adding that the big growth in alternatives has been in real estate, particularly among pension funds. "This slightly unglamorous asset class attracts a very high proportion of alternative assets year after year, and many of our respondents predict growth in coming months." The survey also identified Asia and emerging markets as growth areas, but within more established asset classes such as fixed-income. Structured products have also not taken off as expected. In other findings, the survey notes that liability driven investments are not popular, with only 6% using them. There is also little evidence of strong demand in Exchange Traded Funds and a tendency to shun structured products. |
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