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Allianz hedge arm eyes €2.5bn in assets

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GERMANY – Allianz’s hedge fund group, Allianz Hedge Fund Partners, says it expects to raise its assets under management to €2.5bn in the short term amid growing institutional investor demand for hedge funds.

Managing partner Johan Alström noted that while hedge funds had flourished in recent years – with €1trn managed in around 8,000 products – they were still an underdeveloped asset class.

“Despite these impressive numbers, hedge funds still only represent two percent of the volume on worldwide capital markets.

“Much of the future growth will be driven by institutional demand, so we have set ourselves up to reach €2.5bn in_AUM in the short term,” Alström told a news conference in Frankfurt. He did not specify a timeframe.

At the end of 2004, AHFP’s assets under management totalled €1.35bn – or almost three times the €466m reported one year earlier. AHFP attributed the rise mainly to strong institutional investor demand in Germany, Japan and the Middle East. Half of its assets are from German clients, including parent firm Allianz.

However, Alström said only 15% of AHFP’s total assets were from Allianz itself, with the other 85% strictly third-party business.

Based in Geneva, AHFP offers four fund-of-hedge funds domiciled in Luxembourg as well as several advisory mandates. AHFP says its hedge funds have achieved an annual return of 6.6% after fees.

Like other institutional players, the hedge fund boutique lists pension funds, insurers, banks, foundations and family offices as its clients.

Turning to the current year, Alström said AHFP had already gotten off to a good start, having taken in around €100m in the first quarter. Of the hedge funds currently on offer, investment strategies like “distressed securities” and “long-short equity” were particularly popular with investors, he said.

In terms of AHFP alone, the boutique favours investing in single hedge funds with long-short equity and event-driven approaches. It cites the positive outlook for equity markets and increasing worldwide M&A activity as the reasons for doing so.

According to AHFP Hedge funds relying on a distressed securities approach were the best performers in 2004, achieving an average return of 18.95%. Hedge funds employing “convertible arbitrage” had the worst performance of the asset class, returning just 1.13%.

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