Despite relative outperformance, still room for alternative investments to grow.

Mar 25th, 2009 | Filed under: Editor's Pick, Today's Post | By:
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Some have suggested that the strong performance of hedge funds relative to equities over the past 12 months could come back to haunt it in a rather circuitous manner.   The theory goes that institutional investors with fixed target allocations to different asset classes might decide that alternative investments now represent too large a portion of their holdings – simply because alternatives depreciated much less than equities over the past year.

That was the theory.  But a report from consultancy Casey Quirk and institutional investment database eVestment Alliance says that hedge funds represent the same portion of institutional portfolio allocations now as they have over the past few years.  In fact, institutional allocations to alternative investments (of all sorts) have remained pretty stable at around 3.5% since way back in 2004.

The report also contains some other interesting observations about the greater asset management industry.  For example, check out the chart below showing the average allocations to equities, fixed income and alternatives by type of institution (click to enlarge). More…

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