T?BY, Sweden (HedgeWorld.com)–Preliminary results of a survey of Europe’s consultants indicate that institutional managers on that continent are receiving bullish advice about the future returns of hedge funds.
Prospera Research AB, a Swedish market-research firm, highlights in a forthcoming survey conducted on behalf of IPM-First Quadrant, Stockholm, and the Alternative Investment Management Association, London, that consultants advise their institutional clients to allocate almost one-quarter of their active risk budgets to hedge funds and almost half to alternatives as a whole.
In Prospera’s use of the term “alternatives,” it includes currency management, and tactical asset allocation as well as hedge funds. It distinguished between global and local consultants. Both are equally supportive of hedge funds, but global consultants are somewhat more supportive of other alternatives than are their local peers. Global consultants’ average advice on the allocation of risk budgets is: 31% to long-only equity managers; 20% to long-only bond managers; 27% to currency and TAA managers; and 24% to hedge funds.
Almost 90% of consultants are confident or hopeful of hedge fund managers’ future returns.
The most important criteria for selecting external managers for alternative investments are: an experienced and quality staff, a clear investment philosophy, a high-quality risk management function and the ability to generate good risk-adjusted returns. Neither a well-established name nor the quantity of assets under management impresses these consultants as important.
A total of 27 of the largest European investment consultants were interviewed for this survey, which will be published in September or October 2004.
Contact Robert F. Keane with questions or comments at: