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French hedge fund managers seek to secure more local investment

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FRANCE - French hedge funds are seeking to secure more investments from local institutional investors at a time when most of the capital invested in those vehicles comes from abroad.

According to the 2011 Opalesque France roundtable held in Paris, France has started to benefit from a wide range of innovative initiatives aimed at making the country a leading hedge fund and alternative investment destination.

However, fund managers note local institutional investors are still reluctant to invest in this asset class and a large place is given to investors from elsewhere in Europe and further afield.

Anne-Sophie d'Andlau, co-founder and managing partners at CIAM, said: "Our investor base is in Europe, mostly continental Europe, with 90% of our investors being non-French, based in Switzerland, Luxembourg, Belgium and the Netherlands.

"We are confident, however, that we will attract also some UK-based investors very soon, as more of them are willing to invest on the Continent, since there are more and more funds to look at, and perform due diligence on."

Nathanael Benzaken, global head of managed account development, agreed, saying: "Lyxor's assets come mostly from international clients and only about 11% from France, which is relatively low for an organisation based in Paris.

"We do experience significant growth from institutions based in Northern Europe - the UK, Netherlands and Scandinavia, as well as from North America and Asia - Japan, primarily."

The lack of investment by French pension funds and insurance companies into hedge funds is to be found in the 2008 financial turmoil. 

Reza Ghodsi, managing partner and founder at Darius Capital, said: "It seems that institutional investors, in France in particular, have misconceptions about hedge funds.

"Institutions cut back on their allocation after 2008, and it is true the asset liability mismatch in many of the French funds of funds was particularly absurd, leading to liquidity issues.

"But the same institutions constantly undervalue the full level of risk they have in their long equity portfolio - and now in their fixed income portfolios as well."

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