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Komfie Manalo, Opalesque Asia:

There is safety in numbers and people succumb to their herding instinct, says Ian Hamilton, founder & group chief executive officer of hedge fund specialist administration firm IDS Fund Services. He added that institutional advisors are lazy and not prepared to do extra research and just rely upon the herd to protect them, and as one result, 75% of hedge funds of funds portfolios are invested in the same funds.

Speaking during the latest Opalesque Geneva Roundtable, Hamilton added that there is also the issue that analysts or the people recommending a fund selection have to "please their masters above them, which are either a pension fund or an institution, and that if you don’t do a good or a safe selection, you’re going to be hammered."

He continued, "In a way I note the same in my own business. When there is a choice in the international market between HSBC or IDS for fund administration, the large fund managers will go for HSBC, even though the service is not good, because if the choice is wrong, i.e. if HSBC messes something up, it’s HSBC. If IDS messes, then it’s the guy who selected us who is on the line. So that’s why you get the herding instinct. It is self preservation in institutions."

Three elements why people stick with the usual suspects instead of new talent......................

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