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Hedge fund exodus fails to surface

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GLOBAL - Even with falling returns, institutional investors are still happy to invest in hedge funds, according to research-based consultant Greenwich Associates.

According to the consultant, which conducted a survey in December last year and January this year, capital inflows into hedge funds from institutional investors have remained unchanged since 2006, despite fears of outflows from the asset class.

Pension funds, endowments and foundations directly provide 13% of the average hedge fund's assets under management, while fund of funds account for an additional 23% of hedge fund assets.

For the biggest hedge funds - with over $1bn (€634m) in assets under management - institutional investors have overtaken high-net worth individuals and family offices as a source of assets, as 25% of these funds' assets come from direct investments by institutions, in comparison to 22% by high-net-worth individuals and family offices.

"In terms of importance to funds with more than $1bn in assets, both of these sources rank behind fund of funds, which provide 27% of total assets - up from 25% a year ago," commented Greenwich Associates' consultant John Colon.

That said, high-net-worth individuals and family offices remain the biggest sources of assets for the average hedge fund overall, accounting for 37% of the total, which does not include about 10% of assets provided by the funds' employees and general partners.

Greenwich said the US still accounts for the vast majority of global institutional hedge fund investment, with nearly 45% of institutions investing in hedge funds, representing 2.6% of institutional assets as of 2007— up from 2.2% in 2006 and 1.9% in 2005.

If you have any comments you would like to add to this or any other story, contact Carolyn Bandel on +44 (0)20 7261 4622 or email carolyn.bandel@ipe.com

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