UK Charities Warming To Hedge Funds

by Carla Johnson, Investors Offshore.com

19 February 2004

Whilst UK charities and universities have been slow to embrace the world of hedge funds, recent evidence suggests that alternative investment funds are growing in popularity as institutions recognise that steady returns can be made on investments during the bad times as well as the good.

American universities have for some time utilised hedge funds, and larger institutions such as Harvard and Yale allocate as much as 12% to 20% of their total assets to these alternative investment funds.

By contrast, in the UK, only 4% of charities had money invested in hedge funds in 2003, and an additional 3% in less risky funds of hedge funds, according to a survey of 134 charities conducted by investment bank J.P Morgan Fleming.

However, the survey found that a further 12% of the charities were considering venturing into the fund of funds sector, and 8% were thinking about placing money directly into hedge funds.

Both British colleges and fund management firms are beginning to recognise the potential benefits from their partnership. Examples include the Oxford-Fauchier Partnership, a fund of hedge funds, which began life in March 2001. The fund includes ten colleges from Oxford University, and invests across a dozen strategies and over one hundred different hedge funds.

In 2003, the fund returned 12.25%, significantly outperforming equities in the same period.

Cambridge University has established a similar fund which started from an initial £7 million in December 2002. Assets under management now total around £60 million.

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