investors becoming more risk averse, Survey
The hedge fund market remains healthy, but could see a greater emphasis towards guaranteed products in the coming months as investors become increasingly risk averse.
A survey of European fund industry trends conducted by Morningstar shows a big jump in the number of respondents who think guaranteed product launches will dominate in the next 12 months.
In May, 21% of respondents, mostly chief investment officers, strategists and fund managers at major European firms, thought guaranteed products would dominate launches. This figure rose to 33% in June, then fell to 25% in August, rising again to hit a new high in September at 42%.
The same survey showed respondents felt hedge fund growth to be slowing. In May, 15% of respondents believed hedge funds would dominate new launches. This rose to 21% in June, then fell to 19% in August and 13% in September.
Phoebe Davison, an analyst at Morningstar, said the figures showed a decreasing appetite for risk among investors and a trend towards guaranteed product launches at the expense of other products.
'People are concerned that if they put money into a fund is it going to be there in six months' time,' she said.
Theo Phanos, a director at Trafalgar Asset Management, said guaranteed hedge funds are likely to gain ground, although he is not keen on them.
'I would say absolute returns from hedge funds are not that high and so I am not sure how much those products are going to make sense,' he said.
The outlook for the hedge fund industry as a whole is positive, he added and the number of launches is likely to remain strong as it has become increasingly easy to offer them.
'The infrastructure necessary has become much more attainable. Prime brokers provide much more, offering capital introduction services now. Five years ago this was only on an opportunistic basis,' said Phanos.
On the downside some individual hedge fund strategies have become crowded, but this will correct itself as the investment cycle continues, he added.
Bill Orr, assistant director in European sales, at Martin Currie said he had noticed increasing demand for less volatile funds as well as funds in niche markets. 'I think people have been disappointed by certain areas, so they are looking at niche markets such as China,' he said.
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