Institutional Demand for Hedge Funds 2: A Global Perspective
Nov 6th, 2006 | Filed under: Hedge Fund Industry Trends
By: Casey, Quirk & Associates, The Bank of New York
Published: October 2006
This report is chalked full of interesting tidbits for the “hard to buy for” money manager on your holiday list. It’s an update of an equally interesting report published in 2004 by Casey, Quirk & Associates. While we would love to get into many of the findings regarding the institutional adoption of hedge funds (the chart to the right, for example), we will focus here on the elements of report that pertain to alpha per se.
The Alpha-Beta “Squeeze”
The authors suggest that institutional investors will begin to consolidate their alpha holdings and delineate them from their beta positions:
“Today’s active allocations and hedge fund allocations are blurred. The active/absolute return components of institutional investors’ portfolios converge into a single more absolute return-oriented portion of the portfolio while the beta portion of portfolios is comprised primarily of index-like mandates.”
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[…] This article from Money Management Executive (via Financial-Planning.com) says that - contrary to many expectations - hedge fund managers are continuing to register with the SEC even though they don’t have to. Why? Because they want the implicit marketing endorsement that comes with registration. They know that most of the growth in the hedge fund industry over the next few years will be fueled by institutional investors and that these investors need all the assurances they can get that a hedge fund has met some (any) kind of standard. Reports Money Management Executive: “‘Some may say, Hey, you know what? What’s the big deal?’ said Thomas R. Westle, an attorney with BlankRome in New York. When no one was registered, it wasn’t an issue, but now institutional investors with a fiduciary responsibility to uphold are getting pickier, he said. […]
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[…] So why not combine passive and active under one roof?  The growth of the hedge fund industry shows there is obviously a growing global demand for active management - especially among institutional investors. Why should the largest asset manager in the world get out of the active management business? […]
[…] If gala attendee John Casey (Casey, Quirk) is right about the coming flood of institutional assets into the hedge fund industry, “manager of the year” and “institutional manager of the year” will soon be the same award.  But for now, this Soc Gen subsidiary (not to be confused with the Vegas casino “Luxor” - a whole other type of risk) won these dedicated “institutional” honors. […]