Hedge Fund Investment Has Peaked Concludes Morgan Stanley

by Carla Johnson, Investors Offshore.com

06 April 2005

While hedge fund flows appear to have reached a peak, strong inflows will be maintained in 2005 as pension funds seek to allocate more assets to the alternative investment sector, research conducted by Morgan Stanley has concluded.

Based on data from Tremont Capital, the investment bank noted that hedge fund inflows tailed off noticeably in the latter half of 2004 compared to the first half of the year, mainly as private clients grew more reluctant to place money into hedge funds.

According to Morgan Stanley analyst Huw van Steenis, the data shows that net new money grew by 20% in the first six months, slowing to 10% in the final half of the year.

Van Steenis stated that based on the views of hedge fund firms, net new money was likely to be up on average 10% to 15% this year, with pension funds expected to be providing the bulk of these new assets and funds of hedge funds their most probable destination.

"Our interviews suggest pension fund interest is beginning to shift and allocations are turning to modest flows," van Steenis was quoted as observing by Reuters.

"We think over 75 UK pension fund plans have now made allocations to hedge funds, with all bar 6 going via funds of funds,” he added.

Recommended