50% of institutional investors to increase allocations to alternatives over next five years

Date: Tuesday, September 16, 2008
Author: Investor Daily

Almost 50 per cent of institutional investors are looking to increase allocations to alternative investments over the next five years, according to a report by FineAnswers, in association with Conexus Financial.

The report, which interviewed investors and assets consultants about their attitudes to risk, found 48 per cent of institutional investors saw their absolute returns strategies rising above 20 percent of fund assets by 2012.

Eight per cent of institutional respondents said allocations would rise to more than 40 percent in the same time frame.

"The trend to alternatives, where new investments show low correlations with the traditional asset classes, will undoubtedly continue," FineAnswers principal Jon Glass said.

Glass pointed to the current credit crunch as a reason for the increased interest.

"In the current market downturn, absolute strategies, in terms of their expectations, are going to be more appealing than market strategies," he said.

While institutional investors were looking towards an increase in allocations to alternative investments such as hedge funds, private equity and infrastructure, the survey found that asset consultants were more reserved.

Consultants were more likely to think that absolute returns strategies would remain below 20 percent of fund assets.

While 66 percent of investors believed that pooled vehicles for hedge funds were no riskier than those for long-only funds, 78 percent of consultants thought they were riskier.

The report is based on a survey of 57 institutional investors and asset consultants, and was released today at the Absolute Returns Funds Conference.