Citi’s research indicates that the global pension and sovereign wealth fund allocation to the hedge fund asset class stands today at approximately 3% of the global pension and sovereign wealth fund asset pool of $31 trillion, or $820 billion.
Direct allocator hedge fund portfolios are typically small with only 20-50 managers. Interviewees usually made only one to four allocations per year, writing few, but large tickets ranging from $25 to $100 million.
Emphasis was placed on the “partnership” forged between the direct allocator and their selected managers and on the longer-term investment focus of their portfolios.
Pension and Sovereign Wealth Fund direct allocators have not yet settled on a standard model or approach as most still look to outsourced CIOs, consultants or fund of fund advisers to support their direct allocating efforts.
“While the conventional wisdom is that directly allocated capital is going only to the largest hedge fund managers, we actually found that smaller hedge funds managing between $1 billion and $5 billion experienced the largest net growth in 2010,” said Sandy Kaul, US Head of Business Advisory Services, in a press release.“Global Pensions and Sovereign Wealth Funds Investment in Hedge Funds: The Growth and Impact of Direct Investing” is available at http://www.citi.com/icg/sa/flip_book/GrowthImpactDirectInvesting/.