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Institutions largest hedge fund investors: AIMA

Date: Thursday, March 5, 2009
Author: Laurence Fletcher, Reuters.com

Institutions such as pension funds and university endowments now account for more than half of the $1.4 trillion hedge fund industry's assets, surpassing wealthy individuals, trade body AIMA said on Wednesday.

The Alternative Investment Management Association (AIMA), which represents the global hedge fund industry, said it estimated that this had risen from one-third three years ago.

Pension funds by themselves now account for one-sixth of overall hedge fund assets, it added.

Whilst high net worth individuals have traditionally been the main backers of hedge funds, investors such as pensions, endowments, foundations and governmental authorities, which invest for the long-term, have slowly been raising exposure to the freewheeling asset class in the hope of positive returns in all markets.

Record losses from hedge funds in 2008 saw investors pull out cash rapidly, with $152 billion leaving in the fourth quarter, according to Hedge Fund Research, taking total assets to $1.4 trillion at the end of the year.

However, anecdotal evidence suggests that at least some institutions have been adding.

This week the Universities Superannuation Scheme, Britain's second-largest pension fund, said it was sticking with a medium-term plan to double exposure to alternative assets such as hedge funds and private equity.

AIMA, said the research was based on extensive consultation with its members.

"These figures demonstrate that the hedge fund industry plays an extremely important role globally for the institutions that look after everyone's pensions and savings," said AIMA Chief Executive Andrew Baker.