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Laxman Pai, Opalesque Asia: The proportion of sovereign wealth funds (SWFs) investing in hedge funds has steadily grown in recent years with 35% currently allocating to the asset class, up from 33% and 32% in 2017 and 2016 respectively.
According to 'Preqin Special Report: Sovereign Wealth Funds', the largest allocator in the group is Abu Dhabi Investment Authority, which allocates approximately $62bn.
These large state-owned investment vehicles account for 10% of all institutional capital invested in the asset class, and rely on the industry for a more diversified portfolio, it said.
Almost all (93%) of SWFs investing in hedge funds target hedge funds that employ equity strategies, in recognition of the benefits of the versatility and durability offered by the top-level strategy.
More than four in five SWFs target multi-strategy funds, including Korea Investment Corporation, which looks to spread the risk associated with a single-strategy hedge fund across an array of investment vehicles.
A diversified approach in terms of structure is also adopted by a growing proportion of SWFs: 68% look to invest in hedge funds through both direct and fund of hedge funds vehicles, which may reflect the way in which these institutions are growing their expertise in the asset class.
Furthermore, 52% of SWFs utilize managed account structures, which allow them to exhibit greater control over their hedge fund investments and to benefit from greater transparency...................... To view our full article Click here
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