An article in Preqin’s latest Hedge Fund Spotlight highlights statistics on alternative asset allocations among various kinds of investors, including endowment funds and public pension funds. The article points to notable differences between investment decisions relying on hedge funds compared to those relying on private equity, real estate, and infrastructure. Perhaps most significant is the prevalence of fund of funds dedicated to hedge funds over other alternative assets.
One graphic in the article shows that hedge funds are a relatively new form of investment for many types of institutions, which have made their first steps into alternatives through private equity funds. Despite delayed allocations to hedge funds, many institutions today have dedicated a larger portion of their portfolio to hedge funds compared to private equity.
The final data in the Preqin article illustrates that the investors who adopted an alternative approach to investments earlier tend to be the ones that are now creating larger and more complex portfolios by diversifying into new alternative investment strategies. The article concludes, “There is a need to diversify portfolios from an over-reliance on traditional fixed income and equity products, and the desire for liquid alternatives has led to an increase in interest in hedge funds.”
See the Preqin Hedge Fund Spotlight June 2013 Issue here.