Both the number of direct hedge fund managers used by institutional investors and their overall allocations to the asset class have significantly increased in the last 12 months according to research conducted at an institutional investor conference in the US.
Collectively representing over $1trillion in total assets from corporations, public and government pension plans, endowments and foundations, institutional investors attending a Global Absolute Return Conference event in Boston in October last year reported an increased appetite for hedge funds.
The research conducted in conjunction with State Street found 64 per cent of respondents had over 5 per cent of their portfolios invested in hedge funds compared to 2005, when only 48 per cent of participating institutions had this allocation.
Further, the number of institutions not investing in hedge funds dropped from 16 per cent to 4 per cent over the 12-month period.
In 2006, 60 per cent of institutions invested with one to three fund-of-fund hedge fund managers, up from 43 per cent in 2005.
However, 32 per cent of institutions did not invest with fund-of-fund hedge fund managers, up from 28 per cent on the previous year.
The research concluded that while institutions new to investing in hedge funds were utilizing the fund-of-fund approach, the more seasoned institutional investors looking to save money on fees were in fact leaving this approach entirely in favour of investing directly in hedge funds.
