Disclosure of charges is regulated and standardised for retail investors, but is currently less so for institutional investors. Consequently, institutional investors are finding it difficult to obtain and analyse cost data from asset managers or accurately compare costs across the market.
This was one of the findings of the FCA’s Asset Management Market Study in 2017, which prompted the creation of the Institutional Disclosure Working Group (IDWG). Off the back of the IDWG’s recommendations, the ‘Cost Transparency Initiative’ (CTI), a partnership initiative between the Pensions and Lifetime Savings Association, the Investment Association (IA), and the Local government Pension Scheme Advisory Board (LGPS), was launched in November 2018.
The Eurekahedge 50 (EH50) index was designed to represent the exposures and experience of institutional hedge fund investors. Seeking to create a more selective benchmark reflective of diversified, institutional-quality multi-manager portfolios, Markov Processes International (MPI), in partnership with Eurekahedge, launched this unique Index in December 2014. After its first full year, the industry’s first measure of the collective performance of top hedge funds delivered better risk-adjusted returns with fewer turnovers than all-inclusive hedge fund indices.
For many years, the private fund industry and the securities bar have called for a limited rule set to govern broker-dealers solely engaged in raising capital for private funds or other issuers of unregistered securities or in merger and acquisition advisory activities. These broker-dealers would share several common traits: they do not execute securities transactions, accept orders to purchase or sell securities, introduce or carry customer accounts, handle customer funds or securities, or participate in principal transactions or market making activity.
Gen2 Partners (Gen2) is one of the leaders in customised Asian Hedge Funds for Institutional Investors and Family Offices, in addition to being a trusted partner to help manage investors’ exposure to Asia across all Asian alternative strategies.
Yale University endowment manager David Swensen launched a blistering broadside at the practices institutional investors use to select hedge funds in an interview last year with the Wall Street Journal.
Swensen described fund of hedge funds as "a cancer on the institutional investor world. They facilitate the flow of ignorant capital." His argument was that such funds are self-defeating; investors need to be in the top 10% of hedge funds to succeed and, with a fund of funds, they are likely to be excluded from the best managers.
This document reviews the concept of green investing and reports the results of a European survey of investment management professionals. The objective is to provide background on industry and academic research into green investing and assess the views and uses of green investing.
Large institutional investors are, in effect, "universal owners", as they often have highly diversified and long-term portfolios that are representative of global capital markets. Their portfolios are inevitably exposed to growing and widespread costs from environmental damage caused by companies. They can positively influence the way business is conducted in order to reduce externalities and minimise their overall exposure to these costs.
Japanese interest in US-based hedge funds is projected to increase in the years ahead as Japanese institutional investors and pension managers, in particular, seek to achieve more robust portfolio returns. Japan's aging population, pressured by a low domestic interest rate environment and the need to meet obligations, will be among the main drivers of the pensions' investment activity.
The remarkable rise of the hedge fund industry in the last decade of the twentieth century would not have been possible without the great demand of wealthy private clients for sophisticated investment opportunities. Institutional investors, by contrast, long remained reluctant to invest in hedge funds. Although clearly drawn to the returns and the risk reduction potential of these investments, they have only recently started to shift a part of their assets to hedge funds.
Amongst a backdrop of turbulent financial markets, the concept of sustainable and responsible investing (SRI) is continuing to develop at a rapid pace. An ever–increasing number of institutional investors around the globe consider and implement SRI1 in their investment practices. This also presents opportunities for hedge funds to cater to an increasingly SRI-oriented client base. This article describes the most recent developments within the SRI industry, the prevailing current trends, as well as the effects this is expected to have on hedge funds.
While the bulk of the hedge fund industry suffered from drawdowns and redemptions last year, a handful of non-household funds actually generated the absolute returns that they are, by definition, after. But these under-the-radar managers say their relatively strong performances have still not won them an audience with all-important institutional investors.
Institutional investors in Asia are increasingly finding that structured products are a useful way to buy exposure to hedge fund returns. Driven by market volatility and a greater focus on capital treatment, insurers and financial institutions are increasingly buying funds of hedge funds with principal-protected wrappers. They are also using derivatives and structured products to switch hedge fund investments into their local-currency allocation or even to make them Shariah-compliant.
The amount of capital being sought for high-return private equity real estate funds is at a record high. At the same time, many institutional investors are sidelined by the denominator effect or by a tactical decision to move slowly in an uncertain market that is awash in fund offerings.
In this environment, many quality managers are struggling to reach fund-raising targets, and several of them have offered to improve terms in an effort to gain a competitive advantage over the field (or remain competitive with the field).
The sequence of adverse financial events characterising the market behaviour of the new millennium has forced institutional investors, such as life insurances and pension funds, to revisit the paradigms applied to manage the asset over liabilities equilibrium. Indeed, potential difficulties embedded in periods of bear equity markets and falling interest rates combined with the increasing longevity (in Western countries life expectation increases by one year every four years) and new accounting rules have fostered the pace at which institutional investors are revisiting the potential synergies between the two fundamental poles of competence: actuary and asset management.
The demand for alternative investments such as hedge funds is increasing dramatically. Institutional and retail investors alike are attracted to the investment opportunities offered by hedge funds and the prospects of higher returns, compared to traditional investment funds. However, in times of tighter credit and market volatility, all that glitters is most certainly not gold. It is becoming ever harder to generate alpha or, from an investor’s perspective, to pick a fund which will generate genuine alpha.
It is well known that the debt markets consist of government and agency bonds, corporate bonds, municipal bonds, asset-backed securities and Islamic financial instruments. Participants in secondary debt markets include institutional investors, governments, traders and individuals; while the dominant players in the issuer’s market are sovereign and sub-sovereign bodies, the secondary market is usually dominated by banks and financial institutions.
Institutional investors represent an ever-increasing share of hedge fund assets, bringing about a sea-change in the way hedge funds – and hedge fund administrators – do business.
“Investors are demanding more frequent reporting and greater transparency, and that’s the biggest change I’ve seen in the industry,” Christine Waldron, vice-president of alternative investment products at US Bancorp, says. “Institutions are driving great accountability and frequency of reporting.”
Institutional investors both here and abroad just can’t seem to get enough of 130/30 strategies, with firms including State Street Global Advisors, Société Générale Asset Management, Robeco Investment Management and New York Life Investment Management all launching versions in recent months, with more to come in the near future.
But why are these strategies gaining traction with long-only investors? Are they merely a fad or do they have significant staying power?
We are witnessing a dramatic evolution of investment behaviour in alternative investments, with both a phenomenal increase in the rate of flow of assets from institutional investors and a rapid maturation of the industry’s infrastructure. These are exciting times for hedge fund investment returns which have coincided with the changing composition of the investor pool. This is having a direct impact on the habits of investors in the more prosaic area of operational due diligence.
The assets under management of all the domestic funds put together today stand at a healthy US$44,000 million. Apart from foreign fund houses who have set up shop in India, many Foreign Institutional Investors (FIIs) and hedge funds are also very optimistic about India. HSBC, Deutsche, Fidelity, SunLife are only some of the names who have entered the Indian investment management market. The keen interest of global fund houses in India coupled with booming capital markets has opened up a very key opportunity; that of providing services to these fund houses in India. With the increase in number of players, there is an increasing pressure to perform and cut down margins. One efficient and effective way of achieving this was to replicate the model of "outsourcing" in India.
Although recent media reports tout the rising popularity of multi-strategy hedge funds, a strong argument can be made for the advantages of investing in a levered fund of hedge funds (FOHF). A levered fund of funds is one that invests money in many hedge funds on behalf of individual and institutional investors using leverage, essentially borrowed money, to achieve double digit returns while mitigating downside deviation.
In December 2002, Mainland China introduced the Qualified Foreign Institutional Investor (QFII) scheme which allows for the first time the entry of foreign investors into the domestic A-share market. The first QFII investment took place in July 2003. With the QFII scheme in operation, there is an increasing discussion of a corresponding mechanism for overseas investment by domestic investors ¾ a Qualified Domestic Institutional Investor (QDII) scheme. It is believed that this could help utilise China’s large foreign exchange reserves and domestic foreign exchange savings, thereby helping to maintain a better balance on the capital account.