Hedge Funds ‘Big’ News, East and West

Date: Friday, December 1, 2006
Author: Dailyii.com

Deutsche Bank says private wealth managers can learn a lesson or two from university endowments by heaving a whole lot more money into hedge funds and the like. “Alternative investments are a big part of our investing story right now,” Klaus Martini, global chief investment officer at Deutsche Bank Private Wealth Management, said during a presentation on investments for the well-heeled, as reported by Dow Jones Newswires. The kind of investment cocktail Martini is talking about follows the recipe for the success of Yale University’s endowment, which has been shifting more assets toward alternatives in the past two decades. “We can learn from academia here and that is exactly what we are doing,” Martin stressed, noting the endowment’s annualized returns of more than 15% over the past 10 years compared with 8.6% for the S&P 500. DB’s wealth management group suggested a diversified portfolio that includes pouring in 20% of assets into hedge funds and up to 30% in other alternatives, including private equity, real estates and commodities. Meanwhile, at the other end of the world, the Bank of Japan also acknowledges the bigness of hedge funds as in “big player in financial markets” whose “activities could have a destabilizing effect.” In a recently released report, the BoJ expressed a desire to carefully monitor hedge fund activity lest any major shift in their investments throw the market into a tizzy. The bank currently has the responsibility to keep an eye on hedge fund activity and, when necessary to keep things on keel, inject liquidity into the financial markets as it communicated with market players. The trouble is, according to Dow Jones Newswires, the bank will have a difficult time monitoring hedge fund activity because HFs don’t have to disclose the full nature of their actions.