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Pensions largely unhappy with hedged bets

Date: Friday, October 6, 2006
Author: Riva Froymovich, InvestmentNews.com

Less than a quarter of pension funds are satisfied with their investments in funds of hedge funds, according to Mercer Investment Consulting, but more than half continue to allocate money to them.

A survey by the New York-based firm of over 180 large pension plans worldwide found that only 23% of them are satisfied with their investments, 28% are dissatisfied and 48% are neutral.

In addition, 47% are satisfied with their funds of hedge funds manager, and 58% say they understand the manager's investment approach.

A third of the pension funds surveyed globally invest in funds of hedge funds, Mercer said.

And despite their lack of satisfaction, 54% intend to increase their allocations to hedge funds within the next two years, especially in the U.S. and Canada.

Of those that are not invested in funds of hedge funds, 60% cite fees as their reason.

"The lack of satisfaction expressed by investors is likely to be due to a mixture of high expectations and fund managers not explaining their strategies clearly enough," said Divyesh Hindocha, global head of investment consulting policy at Mercer, in a statement.

"Funds of hedge fund managers can do far more to improve their client servicing…many investment managers are reluctant to disclose full details," he added.