Survey: Investors Say Top Hedge Fund Concerns Have Shifted

(January 25, 2010) — Transparency and liquidity risk have overtaken poor performance as the top concerns for institutional investors investing in hedge funds, according to a global survey by SEI and Greenwich Associates. 

The survey, titled “The Era of the Investor: New Rules of Institutional Hedge Fund Investing,” reveals that diversification remains the primary reason to invest in hedge funds. The survey showed nearly all of the institutional investors who responded this year said they would either increase or maintain hedge fund allocations over the rest of 2010. Additionally, transparency rose in importance this year, with more than 70% of respondents saying they now request  “more detailed information from managers than they did a year ago.” 

“Investors remain committed to hedge funds but that commitment comes with increased expectations,” said Phil Masterson, Managing Director for SEI’s Investment Manager Services division in a news release. “The balance of power has clearly shifted and managers must meet the growing demand for transparency and increase their focus on operational effectiveness if they want to be successful in this ‘Era of the Investor.'”

The survey was conducted in November 2009 by the SEI Knowledge Partnership in collaboration with Greenwich Associates. Participating organizations ranged in size from less than $500 million to more than $20 billion in assets. More than half of they survey’s respondents represented foundations or endowment funds, 23% corporate funds, 19% public or government funds, and 2% Taft Hartley funds. Eighty-three percent of respondents were based in the US, with the remainder in the United Kingdom and continental Europe.   

SEI administers $383 billion in mutual fund and pooled assets and manages $156 billion in assets.