Wealth Managers Put Bulk In Hedge Funds

Date: Tuesday, June 26, 2007
Author: Hedge Fund Daily

Investment in hedge funds by some of the largest private banks and wealth managers in the U.K. far surpasses allocations to other forms of alternatives. According to research by Financial Times, affluent investors have an estimated 30% of their portfolios in alternatives, but their managers devote the lion’s share to hedge funds – more than the investors would do on their own. FT found that GAM leads the list of HF enthusiasts with 27% of its balance portfolio in HFs, meaning the remaining 3% of alternatives is shared among private equity, commodities and the like. Other big HF allocators, says FT, are London & Capital Asset Management (26%), Kleinwort Benson Private Bank (20%) and UBS Wealth Management, estimated at between 10% and 25%. Philip Wood, director of personal financial planning at PricewaterhouseCoopers, told FT that he is “not surprised” that managers put so much in hedge funds, even though most investors, viewing them as risky, “wouldn’t allocate anything like as much as this themselves.” While Richard Bethell of ComPeer suggests the higher HF allocation is due to investors “looking for a bit of excitement,” he did note that wealth managers and their clients appear to be on the same page in evaluating the risks associated with private equity and commodities. Bethell further commented that private equity may attract less allocation because of the high minimum investment requirements.