Hedge fund managers say institutional investor base is growing

Date: Tuesday, March 4, 2008
Author: Hedgeweek.com

Some 55 per cent of hedge fund managers report that their institutional investor client base has increased over the past three years, according to a new report from Preqin Hedge, part of alternative investment research firm Private Equity Intelligence.

The report, entitled Growing Influence of Institutional Investors in Hedge Funds, draws on a survey of 50 hedge fund and fund of hedge funds managers, and says institutional investment now accounts for an average of 44.8 per cent of capital invested in a hedge fund.

The report also finds that larger hedge funds are more popular with institutional investors, who account for 75 per cent of investment in funds with USD25bn or more in assets. Hedge funds with the longest track record have the greatest average proportion of institutional investment, with firms established before 1995 having between 67 and 75 per cent institutional clients.

Funds of hedge funds receive the greatest amount of institutional capital, the report says; on average 60 per cent of capital invested in funds of hedge funds capital comes from institutional coffers. Global macro (58 per cent), long/short equity (57 per cent) and multistrategy (49 per cent) funds are the strategies most popular with institutional investors.

Institutional quality infrastructure is the challenge most commonly cited by hedge fund managers in attracting new institutional investors, with 40 per cent of managers listing this as their highest priority in order to qualify for institutional commitments. A quarter of hedge fund managers rate reporting and transparency issues as their main concern, although compliance issues and regulatory requirements are also important.