Investing January 11, 2007

Asian Hedge Fund Investments Cited as Top 2007 Performer

January 11, 2007 (PLANSPONSOR.com) - Pension funds, government organizations and endowments and foundations say they are particularly eager to expand their hedge fund holdings in the Emerging Asia region, a new survey found.
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A Deutsche Bank news release about its latest Alternative Investment Survey said more than half of respondents indicated their plans to increase their exposure to the region, which is predicted to be a top performer for the second year in a row.

Not only that, but respondents felt that hedge funds with holdings in China are going to see “a huge jump” in assets; Deutsche Bank predicts inflows of more than 38% of current investment levels to these funds.

“Despite a series of setbacks and scares in 2006, survey respondents feel the hedge fund industry will continue to grow modestly in 2007,” said John Dyment, global head of the Hedge Fund Capital Group at Deutsche Bank, in the news release. “Investors indicated that they are keeping the market and industry events of 2006 in perspective and using risk management as key factor in selecting hedge fund managers.”

Other survey highlights include:

  • As the best performing investment strategies for 2007, 18% ranked long/short equity 13% ranked macro and 12% mentioned event-driven/relative value strategies.
  • Some strategies will see a dramatic growth of assets, such as merger arbitrage, which is predicted to have a 20% increase in assets based on portfolio rebalancing. Others, such as credit arbitrage, will see outflows of as much as 13% of current assets.
  • During 2006, the number of investors willing to accept longer lock-ups surged. More than half are willing to accept a lock-up of two years or more, a figure that has more than doubled since 2005.
  • Investors are not enthusiastic about hedge funds adding private equity components to their traditional hedge fund offerings; 39% of investors feel that it is a bad idea for hedge funds to make private equity investments.

More than1,000 representatives from almost 700 institutions responded to the survey, including banks, corporations, insurance companies, consultants, family offices, high net worth individuals, wealth management companies, funds of funds, pensions, government organizations, endowments and foundations.

The survey report is  here .

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