Nordic investors keen to increase allocations to hedge funds – survey

EUROPE - Nordic investors' allocations to hedge funds are expected to grow further during 2011, with 32% of investors planning to increase their allocation to the asset class, a new survey has found.

According to SEB's Nordic Hedge Fund Investor survey, allocations to hedge funds are expected to rise over the second half of this year, with an increasing interest in funds with $250m (€175m) to $1bn in assets under management.

Only 2% of respondents to this year's survey are seeking to decrease their allocations. By comparison, last year, 14% planned to cut hedge fund investments.

In terms of geographical spread, one of the most favoured regions was the US, where 46% of investors surveyed plan to invest, followed by Europe (39%) and Asia excluding Japan (37%).

However, to be willing to invest, most Nordic investors require a hedge fund to have at least a two-year track record, monthly liquidity and a fund size larger than $50m, the report said.

The survey also found that the Nordic investor focuses primarily on the fund strategy, leaving the legal structure as a secondary issue.

In addition, investors are not particularly sensitive to fee structures since "proper alpha is worth paying for in a world where beta is almost for free".

In total, 55% of investors - mainly pension funds - have allocated less than10 % of their total assets to hedge funds in 2010, and most of them have not yet reached their maximum allocation limits to hedge funds, SEB said.