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Laxman Pai, Opalesque Asia:

There are now from $150bn to $200bn of assets in global alternative risk premia (ARP) funds following a long/short, multi-strategy approach, estimated a survey by MJ Hudson Allenbridge.

This estimate excludes strategy offerings by investment banks, pointed out the MJ Hudson Allenbridge Alternative Risk Premia Fund Review 2019.

The 2019 survey was conducted using an online questionnaire of 25 asset managers representing the majority of the assets ($120bn) managed in this market.

Despite the challenges with performance, 46% of our survey respondents reported AuM growth in excess of 20% in 2018. Larger managers experienced faster growth than smaller managers, it said.

Pension funds remain the most important client base for ARP managers, while the role of asset managers is increasing. Existing hedge fund allocations are the most important source of funds, whereas the respondents expect less allocations from low-risk assets compared to 2017.

Recent performance of ARP funds (notably during 2018) is considered the largest impediment to further investment. The industry is still seen as difficult to navigate given the large number of seemingly similar strategies, but concerns of crowding have dissipated somewhat since 2017.

The average ARP fund returned -7.5% (in excess of cash) in 2018, with a volatility of 6.1%. Dispersion in returns is significant, as individual fund returns ranged from -13.6% to +3.4%, it said.

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