UK - Former UK pensions minister Frank Field reckons the best days of hedge funds are over.
He was reacting to news that the MPs' own pension fund is looking to invest in the asset class. The comments come as a new study by Greenwich Associates has found that a third of European institutions are looking into investing in hedge funds (see separate story).
"The House of Commons pension fund is jumping on a bandwagon whose best times are past," Field said of the scheme's decision to invest £8m in hedge funds.
He told IPE: "The more crowded the hedge fund market becomes, the more pedestrian their returns become."
He added: "The returns of hedge funds are generally at the expense of less nimble pension funds so it is inevitable that there is pressure to appoint them.
"To use sensibly more exotic investments it's necessary for the Trustees to have more training (which seldom happens) and the consultant to improve reporting (ditto)."
At the European Fund Manager Selection conference in London Mark Nicoll, investment partner at Lane Clark & Peacock, admitted that investment consultants were still in an "uncharted area" when it comes to alternative asset classes.
Cooperation with specialist advisors was often needed. As for hedge funds he advised institutions to "make sure they've got good connections with the managers" to balance out some of the lack of transparency in the asset class.
With regards to private equity he said that there was "inconclusive data" about whether long-term returns justified the extra risk.