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Alternative Market Briefing

Institutional investors approach to hedge fund investing has to change

Thursday, July 07, 2011

amb
John Liu
From Kirsten Bischoff, Opalesque New York:

For the first time in 13 years, New York City’s five pension funds finished their fiscal year with returns that surpassed 20%. "While the markets remain volatile, we have vigorously pursued a diversification strategy to enhance our returns while lowering pension costs to the city," City Comptroller John Liu said. (Source) Liu added that targeting hedge funds and other alternatives added to the increased performance.

Institutional money has been a slow but steadily growing investor presence over the past decade but has picked up pace since the financial crisis as large pensions and endowments are underfunded and hoping alternatives have the power to boost their returns.

While much of these allocations went to larger funds in the wake of the financial crisis, more of these investors are moving their focus to emerging managers. Firms such as hedge fund service provider Investcorp (which manages approximately $5bn across hedge fund investments), expect that this trend will add to the capital protection that institutions value, as their own research found that the largest funds did not successfully protect investor capital during the crisis.

"To the exten......................

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