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Portfolio > Alternative Investments

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Multistrategy solutions were the hedge fund products most frequently requested by institutional investors during the past 12 months, according to a new report.

Cerulli Associates discloses this finding in “Alternative Products and Strategies: Identifying Enduring Opportunities in Complex Markets.” The report examines the retail and institutional alternative investment landscape, including product preferences, new product development plans, distribution strategies, client demand, plus organizational structure and staffing.

The report revealed that 78 percent of institutional investors requested multistrategy hedge fund products during the past year, a significantly higher percentage than requests for other solutions. Among them:

  • Emerging markets — 56 percent;
  • Long-short equity — 44 percent;
  • Global macro: — 44 percent;
  • Event-driven — 33 percent;
  • Equity market neutral — 33 percent;
  • Long-short-credit 22 percent;
  • Global/emerging market debt — 22 percent;
  • Managed futures — 22 percent;
  • Structured credit — 22 percent.

“Multistrategy funds continue to be a significant part of the hedge fund industry,” the report stated. “These funds can offer institutional investors steady sources of return and reduced exposure to any one asset class or investment style, thus reducing portfolio volatility and providing diversification.

“This risk-mitigated diversification is appealing to the more conservative institutional investor.”

Nearly three in four (72 percent) asset managers are developing alternative asset business internally with existing portfolio management teams, the report noted. One in three (33 percent) have hired sub-advisors. Almost as many asset managers (31 percent) have built alternative asset business internally with an acquired portfolio management team.

Among firms that distribute alternative investments to retail and institutional investors, the majority employ one product management (79 percent) and product development team (75 percent) responsible for building alternative products available through both channels.

Nearly half of asset managers have separate teams dedicated to selling alternative investments, the report stated. And a little more than one-third employ dedicated teams for marketing efforts.

The report added that managed accounts and limited partnerships are the fund structures most frequently requested by investors (62 percent). Less frequently asked about are commingled investments (direct; 57 percent), listed funds (48 percent), UCITS (Undertakings for Collective Investment in Transferable Securities), comingled investments (fund-of-funds; 29 percent); and fund-of-one (fund-of-funds; 29 percent).


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