WEST PALM BEACH, FL (HEDGECO.NET) – Mercer Investment Consulting surveyed more than 570 European pension funds with $364bn under management. It found that some 13% of continental European and Irishpension funds invest in hedge funds, almost double the number in the UK. “In the UK, 7% of funds invest in hedge funds, spending 6.9% of their assets on average,â€ÂMercer said. Larger funds are more likely to invest in hedge funds, with around one in ten doing so.
The biggest potential growth areas are liability-driven investment strategies and interest rate hedging strategies. Some 10% of UK funds and up to 40% in the Netherlands and Ireland were considering these approaches respectively.
“The number of searches in Continental Europe increased dramatically in 2005 as both our business and the use of consultants continue to grow across the region,†said Andy Barber, European Head of Research at Mercer IC. Ireland saw the most search activity within the region, driven by changes in asset allocation and by the trend away from single-manager balanced structures towards structures seeking global equity exposure. “We expect specialist search activity to increase across Europe this year,†added Mr. Barber.
A manager search is when an institutional investor, such as a pension fund, is seeking to hire an investment manager to manage a portfolio of assets on its behalf, such as a hedge fund. This hiring activity can arise as a result of growth in assets under management, a change in investment strategy, a change in investment manager structure, or a decision to replace an incumbent investment manager.
Nearly 230 searches were conducted within the UK, compared to 241 in 2004, with total assets placed at US$29.9 billion. Global equity represented 42 of the searches and nearly US$6.2 billion in placed assets, an increase from 2004. In Europe, excluding the UK, assets placed rose slightly, from US$22.7 billion in 2004 to US$25.2 billion in 2005. Multi-asset and global equity saw the most search activity in the region.
Mr. Barber commented: “While global equity continues to see the most search activity within the UK, the pick-up in private equity searches is striking. This suggests our UK clients are continuing to take a long-term view when deciding on strategic asset allocation.â€Â
“As well as reducing risk, pension funds are putting greater emphasis on active manager strategies (‘alpha’ strategies) to enhance returns.â€Â
Alex Akesson
Contributing Writer
HedgeCo.Net
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