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Preqin survey: 43% of institutional investors in hedge funds are investing in or considering UCITS funds in 2010

Thursday, March 11, 2010
Opalesque Industry Update –UCITS III is attracting growing numbers of hedge fund managers and investors according to Preqin’s survey results

In February 2010 Preqin carried out a survey of 50 institutional investors to determine the current demand for UCITS-compliant hedge funds. Preqin also surveyed 60 fund of funds mangers to ascertain the present supply of UCITS funds in the hedge fund industry. Key findings of the survey include:

Investor Survey:
• 8% of all institutional investors surveyed allocate capital to UCITS funds, and all are European-based.

• 35% of institutional investors, including investors based outside Europe, are considering adding a UCITS vehicle to their hedge fund portfolio in 2010.

• Four factors were most frequently listed by investors as the value added of UCITS: transparency (41%), regulatory oversight (22%), liquidity (22%), and a strong risk management framework (11%).

Fund of Funds Manager Survey:
• 28% of managers surveyed are currently running a UCITS platform, and a further 28% are presently adopting UCITS style in their hedge fund portfolio.

• 51% of European-based managers currently offer UCITS products, constituting the largest source of UCITS funds.

• Presently, 11% of managers from ROW run UCITS funds and we predict investor appetite for UCITS products to increase outside Europe, in places such as Asia, Latin America and the Middle East.

• Better liquidity terms (27%), investor demand (26%), regulatory compliance (21%), and benefits of the EU passport (6%) were the biggest incentives for managers to set up a UCITS structure.

• Larger managers are more likely to offer UCITS, with 59% of managers with assets under management in excess of $1 billion currently running a UCITS platform. Going forward, we expect further increases in large and established hedge fund managers which offer UCITS-compliant products.

“UCITS has become increasingly popular with investors, with 8% of investors surveyed currently allocating capital to UCITS compliant hedge funds and a further 35% of institutional investors considering making their maiden investment in 2010. The UCITS trend has been the strongest in Europe, however, features such as transparency, liquidity and backing by solid regulation are attracting investors worldwide to UCITS vehicles; we predict the UCITS universe will continue to expand particularly as investors remain cautious and calls for increased regulation of the industry continue. Growing numbers of managers, predominantly the larger and more established managers, are accommodating investor demands by offering UCITS products. UCITS offers solutions to mitigating risks, but it also has some drawbacks such as higher structural costs and investment restrictions,” said Nicole Rubbi-Clarke, editor of the report.

Full report available at: www.preqin.com/UCITSreport

Preqin is the leading source of information for the alternative assets industry, providing data and analysis via online databases, publications and bespoke data requests. With offices in London and New York, Preqin has built a reputation in the alternative assets industry for providing the most comprehensive and extensive information possible. www.preqin.com


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