Global institutional demand for hedge funds will triple by 2010, increasing from $360bn currently to...
Global institutional demand for hedge funds will triple by 2010, increasing from $360bn currently to more than $1 trillion, according to a new study of leading institutional investors, investment consultants and hedge funds.
The study, by the Bank of New York and Casey, Quirk & Associates entitled Institutional Demand for Hedge Funds 2: A Global Perspective found that by 2010, institutions investing in hedge funds will increase to nearly 25% of all institutions, up from 15% today. This represents a more than 60% increase.
Retirement plans globally will account for the vast majority of asset flows, with corporate and public pension plans in the US accounting for the largest percentage increase overall.
This research follows a 2004 study by the bank and Casey, Quirk that examined US institutional investor appetite for hedge funds.
The 2004 study forecast that US institutional investment in hedge funds would increase from $60bn to $300bn by 2008, a prediction that thus far is largely in line with actual investments by US institutions.
"Broadening acceptance of alternative investments coupled with lower expected returns from traditional investments are driving demand for hedge funds among global institutional investors," said Brian Ruane, executive vice-president at the Bank of New York.
"Institutional investors are increasingly recognising that hedge fund allocations have provided significant diversification benefits while delivering the net returns they require."
According to the study, institutional investors' experience with hedge funds has and will continue to influence the way they invest broadly, indicating that "less constrained," active investment techniques will become a standard component of investing moving forward.
A further finding was that the vast majority of institutions investing in hedge funds use either fund of hedge funds (FoHFs) exclusively or the 'dual approach' model - accessing hedge funds concurrently through FoHFs and direct investments.
FoHFs will remain the starting point for the majority of institutions initiating a hedge fund investment programme. The study predicts half of global institutional flows will go to FoHFs over the next five years.key points
Institutional demand set to triple by 2010
Broader approval for alternative investments responsible
FoHFs popular route into these investments
Caring for children and elderly relatives
Similar to June 2007
Square Mile’s series of informal interviews
Fine reduced to £60,000
Two roles created