| Asset flows from long-only equity to hedge funds intact |
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| 30/09/2007 | |
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Asset flows are moving from actively managed long-only equity mutual funds to hedge funds, according to a new study by the TABB Group. Ninety percent of the surveyed institutional investors believe that the heightened search for alpha will prompt traditional managers to commit more assets to hedge funds. New strategies such as portable alpha vehicles and130/30 do not yet have extensive track records, but are impacting the asset allocation strategies of institutional investors. Tabb Group interviewed 67 portfolio managers, CIOs, heads of research and senior managers of hedge funds, FOHFs and long-only asset managers. Collectively, they manage $12.3tr in assets. The overwhelming majority of those assets are managed by traditional equity managers. "A major change is underway at alpha-seeking firms," says Larry Tabb, CEO of the group. "They are moving towards shorter-term event-driven strategies and longer-term holding strategies that resemble private equity type investments." More than 40% of the funds reported that trading costs were the most significant cause of lost alpha and only 35% believe that brokers could help them capture alpha." In other findings, nearly half of the managers contend that the greatest source of alpha will be generated by new geographic markets. The surveyed firms also expect to shift research from a sell-side function to one performed by the buy-side. While spending on broker research will decline, the buy-side is expected to generate 63% of its research internally. The setback suffered in July and August by alpha-generating strategies cited in the report is unlikely to dampen the long-term inflows into hedge funds. A number of research firms, among them Trim Tabs, predicted massive redemptions to continue in September, but evidence is emerging that despite a gloomy summer, a number of fund-of-funds such as Gottex actually experienced net inflows in August. Trim Tabs also attributed much of the recent volatility to hedge fund outflows. The real crisis triggers, however, are more likely to be the bursting of the housing and credit bubbles. Quantitative strategies were said to be among the worst performers. Yet a number of them have managed to recover from their wounds. AQR Capital Management, which suffered losses in early August, actually managed to attract net capital inflows during the month. VB |
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