Komfie Manalo, Opalesque Asia: The rising market volatility is seen as a great opportunity for hedge funds to create returns, but they have one main concern. Their investors, now mostly comprised of conservative pension funds and college endowments, do not want hedge fund managers to make risky bets and urge them to be cautious.
Martin Visairas, global head of capital introduction at Citigroup, told The Journal, "The institutionalization of the industry has pushed managers to rein in volatility and manage risk-taking," said Citigroup's global head of capital introduction. He added that hedge fund performance has become unstable over the past three years unlike during the previous decade.
Citigroup said that institutional investors currently account for 71% of total hedge-fund assets, compared with only 20% in 2002.
Several industry insiders added that institutional investors are demanding safer bets from their hedge fund managers, as well as more transparency and disclosure. What they don't want are high-stakes investments which hedge funds are traditionally known for.
Nicolas Rousselet, head of hedge funds at Swiss investment firm Unigestion, said: "We see investor risk appetite as very low. We don't see them willing to invest in managers taking big swings." Unigestion manages $20 billion in assets.
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