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Alternative Market Briefing

Survey: Investors’ sustained focus on diversification positive for hedge funds and alternative beta

Tuesday, July 12, 2016

Benedicte Gravrand, Opalesque London:

A survey by global consultancy Willis Towers Watson reports that investors’ focus on diversification and value for money will continue to dominate hedge fund allocations.

The Global Alternatives Survey also says hedge funds hold the second largest share of assets (21% and $755bn) among the top 100 alternative investment managers globally. Funds of hedge funds (FoHFs) have the fifth largest share (6% and $222bn).

Bridgewater Associates is the largest hedge fund manager with $88bn and Blackstone is the largest FoHFs manager with almost $68bn.

Recent returns have been disappointing and have led to redemptions, but this is healthy for the industry, the firm says. Besides, investors will continue focusing on diversifying and value for money, and "facilitating this effort is the recognition that hedge funds are not an asset class."

They will also go to other cheaper diversifying factors such as alternative beta strategies. Although there is a risk of crowding in that emerging space, it adds, and some investors may not fully understand the risks of investing here.

The firm anticipates some further redemption from the hedge fund industry, especially from FoHFs, given their high fees. However, "we continue to see value......................

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