“Appetite for alpha to rise” according to institutional survey

12 February 2008

According to a new survey from the “Thinking Ahead Group” at consulting firm Watson Wyatt, “respondents expected the appetite for alpha to rise, stirred by a focus on absolute return investment, premised on greater investment product transparency.”

Perhaps strangely then, survey respondents have ranked hedge funds, funds of funds, large consultants (Watson Wyatt?) and buy-out firms as “industry losers” in terms of revenue growth.  Multi-strategy funds, fiduciary management, niche consultants and investment banks were judged to be likely “industry winners” according to the survey.  (Hedge fund blogs, in case you were wondering, were not included in this particular survey).

Specifically, 73% of nearly 500 respondents (mostly European) agreed or “strongly agreed” with the statement, “Appetite for alpha will grow significantly due to the need for higher returns”.  Conversely, only 12% agreed or strongly agreed that “Appetite for alpha will be modest, reflecting doubts about its sustainability and likely impact.”

When asked about fees for alpha, respondents were split almost evenly between those who felt fees for alpha would drop and those who felt they would not. (Note: respondents were asked to agree with one of two opposing statements in each question). 

In addition, 75% agreed or strongly agreed that “separate ’going rates’ will be established for alpha and beta”. 

Things get even better for boutique alpha-focused asset managers.  A whopping 66% of respondents agreed or strongly agreed that “There will be a proliferation of small-scale, specialist asset management boutiques”.   And 71% agreed or strongly agreed that “Institutional buyers will have an increasing number of relationships as specialisations deepen.”

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One Response to ““Appetite for alpha to rise” according to institutional survey”

1. Wednesday links: railroad renaissance « Abnormal Returns Says:
   February 13th, 2008 at 12:10 pm

   […] Not surprisingly, the “appetite for alpha” is expected to rise. (All About Alpha) […]