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J.P. Morgan Fleming on European Alternative Strate

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LONDON (–J.P. Morgan Fleming released the results of a survey on European alternative investment strategies, finding a lot of caution in pension fund managers’ approach to both the hedge fund and currency-management asset classes.

J.P. Morgan Fleming contacted more than 600 institutions in the United Kingdom and continental Europe between November 2002 and May 2003, successfully interviewing 341 of them about their attitudes toward alternative strategies–real estate, hedge funds, private equity and both active and passive currency overlay.

Of the 341 interviews, 171 were of managers of the largest pension funds in the United Kingdom and 170 of managers in the remainder of Europe, including some of the largest pension fund managers in Germany, the Nordic countries, the Netherlands, Italy and France, said Jacqueline Meere, spokeswoman for J.P. Morgan Fleming.

The survey found wide divergence in its respondents’ attitudes toward the four alternative investment strategies. On the optimistic side, 70% of interview subjects currently invest in real estate and another 10% are considering it; 48% of subjects are invested in private equity and 19% are considering that. But with regard to hedge funds, only 22% had invested and another 41% weren’t even considering it. Likewise, there was much caution about currency overlay strategies–55% were neither invested nor had it under consideration.

Those who said that they were not invested in a particular asset class were asked why not. For those not invested in hedge funds, 56% gave perceived risk as one of the reasons, 27% mentioned advice from consultants, 26% lack of understanding of such funds, 23% the lack of principal protection and 17% spoke of illiquidity.

For those not invested in private equity, again, perceived risk was the dominant reason (64%), followed in this case by illiquidity (39%) and advice from consultants (21%).

The survey also found that the incidence of investment in hedge funds varies enormously from one country to another. The highest incidence is in France, where 80% of the interviewees have a stake in such funds. The lowest incidence is in the United Kingdom, only 8%.

When interviewees were asked their reasons for investing in hedge funds, 76% cited low correlation with other asset classes and 42% cited the potential for higher returns.

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