Hedge Funds Not The Product Of Choice For Wealthy Investors, Says Survey

by Philip Morton, Investors Offshore.com

06 February 2002

According to a recent survey conducted by consulting firm, The Spectrem Group, hedge funds may not be as popular with US high net worth investors as had previously been supposed.

The survey looked at both hedge funds and funds of hedge funds, and found that of those polled, only 7% were invested in hedge funds. Over half of the high net worth investors questioned said that they were looking for less dangerous investment products, and descibed hedge fund investement as 'very risky'.

Another recent survey, this time conducted by the Consumer Federation of America, drives the message home for hedge fund and fund of fund managers. The study found that although there are more than 5 million households in America with liquid assets of $1 million or more, and another 40 million homes with $100,000 or more, only 17% of those polled said that they had a good understanding of how hedge funds actually work, compared with 68% who said that they were familiar with the workings of mutual funds.

Although many funds of hedge funds showed better than average returns in 2001, investment experts are cautioning average or moderately wealthy investors not to be drawn in over their heads by the 'mystique' of hedge fund investment, or by a misconceived idea that the majority of HNWI are invested in these products.

The Spectrem report concluded that in the final analysis, it has been institutional investors such as pension funds, insurance companies, and banks which have predominantly reaped the rewards of hedge fund investing - in many cases, high net worth investors are just as cautious as retail investors, and prefer to keep their money somewhere a little less risky.

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