Hedge Funds Becoming A Mainstream Investment, Says Study

by Carla Johnson, Investors Offshore.com

08 February 2005

As financial institutions continue to increase their alternative investment allocations, a new study by the London-based fund manager Man Investments has concluded that hedge funds are rapidly becoming a mainstream investment, the Hong Kong Standard has reported.

Evidence of this has been witnessed with last year’s announcement by the California Public Employees' Retirement System (Calpers) that it will double its total hedge fund investments to around $2 billion.

JP Morgan's $7 billion purchase of the multi-strategy hedge fund High Bridge Capital in September 2004 has also been cited as an indication of how institutions are increasingly keen to increase their share of the hedge fund business.

“This continued in 2004 with increased asset flow and institutional interest bringing clearer structure and greater accountability to the industry,” the study noted.

“There is clear evidence of stronger interest by institutional investors and a number of notable US$10 billion-plus hedge funds and funds of hedge funds have either set up investment management operations in the region or intend to do so,” the report added.

While estimates vary, it is widely perceived that hedge funds assets are at, or very close to, the $1 trillion mark, up from around $650 billion in 2002.

The Man study showed that more jurisdictions were opening their arms to hedge funds, particularly in Asia with Hong Kong and Singapore undergoing regulatory changes to accommodate the hedge fund sector.

The fund of hedge funds sector was found to be the fastest growing investment sector in Asia in 2004, according to the report, while the best performing strategy was emerging markets.

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