WEST PALM BEACH, FL (HedgeCo.Net) – The US pension funds may soon get aggressive with their hedge fund investments during the coming years, according to released reports. Investments frominstitutions may account for up to 50% of the total hedge fund asset inflows by the year 2008. According to a new joint study conducted by Bank of New York and consultant Casey, Quirk & Acito,over the next four years, pension funds may pump about $300 billion into hedge fund investment management portfolios.
Currently total institutional investments into hedge fund strategies average out at about $60 billion annually. This total also includes other institutional investors such as endowments and foundations. The new study however suggests that pension funds as a group will account for a significantly higher portion of the projected new assets going into hedge fund management portfolios.
The new study showed that during 2003, institutional investors devoted $66 billion to hedge funds. About half of these assets came from endowments and foundations, while pension funds accounted for the rest of the new investments. This trend, according to the study, would mean that new hedge funds coming to the market might depend on institutional investors for up to two-thirds of their investment assets.
Some consultant managers think that many pension funds embracing hedge funds are doing that out of the shrinking returns coming from equity and bond portfolios. However, they also warn that many of those pension funds are embracing hedge fund strategies based on past returns, according to such views, future hedge fund returns may be smaller than past returns. The study projects that future hedge fund yearly returns may be in the range of 8%, partly due to less-volatile investments in addition to the desire to reduce assumed risk.
Paul Oranika
Editor-in-Chief
HedgeCo.Net
Email: Editor@hedgeco.net
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