Alternative investments are a permanent fixture in institutional portfolios: Growing appetite for separating alpha and beta returns

Jul 5th, 2006 | Filed under: Hedge Fund Industry Trends

From: HedgeWeek Newsletter
Published: March 31, 2006

Excerpt: 

“A new study by State Street reveals that hedge funds have shed their ‘niche’ status and are a firm part of the US institutional allocation process. 

“Gary Enos, executive vice president and head of State Street’s alternative investment servicing business, said: All signs indicate that what began as a niche category catering mainly to highnet worth individuals and US endowments and foundations has become a permanent fixture within a broader set of institutional portfolios,

“He added: Satisfied customers go a long way towards explaining the industry’s proliferation.

“Our study reveals hedge funds are meeting institutional investors’ expectations with an astounding 100 per cent satisfaction rate in achieving portfolio diversification as well as high marks for lowering portfolio volatility and increasing absolute return.

“State Street Corporation’s second institutional investor hedge fund study was released yesterday. State Street conducted the study late last year in conjunction with the 2005 Global Absolute Return Congress (Global ARC). Survey respondents included global corporate pensions (18 per cent), public and government pensions (42 per cent) and endowments and foundations (40 per cent) with investable assets totaling more than USD 1 trillion.

“According to the study, most investment boards and trustees of institutions (81 percent) have become more comfortable with investing in hedge funds in the past year, and the majority (52 per cent) of these governing bodies spend 15 per cent or more of their time discussing alternative investments. The survey also found that most institutions intend to add new hedge fund and private equity managers to their current manager line-up in the coming year.”

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