Hedge fund use by European institutions has increased dramatically in 2005. Their use by continental respondents to the Russell Investment Group’s seventh annual report on alternative investment doubled to 48% from 24% in 2003.
By 2007, European institutions expect to dedicate 7.2% of portfolios to hedge funds, an increase from the 5.3% estimated for 2005. Nearly three-quarters of European hedge fund assets are invested in funds of funds, while 25.5% are invested in single funds and 0.1% is internally managed, says the report.
Private equity allocations are expected to reach new highs in all markets in 2007. European tax-exempt institutions currently allocate 4.5% of portfolios to the asset and are planning to increase this to 6.1% by 2007.
In Europe, where two-thirds of investors have real estate allocations, the proportion in the class is expected to rise to 10.5% in 2007 from 9.8% currently.