Merrill Lynch Highlights Ability to Deliver Portable Alpha to Institutions

NEW YORK (HedgeWorld.com)--Part of Merrill Lynch Investment Managers' 2005 strategy is to design for institutional clients portfolios that extract alpha returns from a variety of asset classes and hedge out the market risk, executives said at a press meeting.

The search for alpha continues to blur the lines between traditional investments and alternative strategies, but long-only equity and active fixed income still account for more than 60% of institutional assets that become available every year to be managed by third parties, said Jamie Kase, head of MLIM's Americas institutional unit.

Whereas in the past 20 years most institutions were able to make enough money by going with the market, these beta returns have been squeezed in recent times. As a result there is demand for more alpha, regardless of the source, he said.

If returns are anemic, the ability to identify and find alpha will be of prime interest to clients, said MLIM President and Chief Investment Officer Robert Doll. Part of the returns to be had from core equity and bond portfolios is of this kind.

As far as the alternatives category is concerned, the firm has single-strategy hedge funds as well as funds of funds with about US$2.3 billion in assets. It has launched a third fund of funds.

But Messrs. Doll and Kase stressed the greater revenue opportunities in private equity and MLIM's capabilities in that area. They pointed out that among alternatives, buyout funds account for 37% of annual institutional revenue availability, real estate for 28%, hedge funds for 21% and venture capital for 14%.

The investment manager, a division of Merrill Lynch & Co. Inc., has US$473 billion in total assets under management worldwide, of which US$228 billion comes from institutions.

Contact Bob Keane with questions or comments at: bkeane@investmentadvisor.com.

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