UK Institutions Allot 28% of Portfolios to Alts

(September 27, 2010) — A new survey reveals institutional investors in the UK are allocating nearly a third of their portfolios to alternative assets, up from 21% three years earlier.

The recent survey by JP Morgan Asset Management (JPMAM) reveals the trend toward alternatives will likely continue, with most respondents expecting to increase their allocations to alternatives – at the expense of equities – to 31% over the next two to three years.

Hedge funds had the highest alternative weightings, with an average allocation of 8.2% of a total portfolio, representing an increase from 6.1% in 2007. The analysis revealed this could rise to an average of 9.2% over the next two to three years. JPMAM said the number of schemes investing in hedge funds also increased notably — 45% of investors surveyed already had or were looking to invest in hedge funds, up from 23% in 2007.

Hedge funds were also deemed the most attractive investment for the longer term, along with private equity and real estate over the next two to three years. The report indicated that while real estate still enjoys the highest market penetration, the percentage of respondents investing or planning to invest in the asset class has fallen since 2007.

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From a regional perspective, UK pension schemes expect the strongest returns in alternative assets to come from emerging Asia. The region is particularly favored by private equity investors, the study noted, with 18% of respondents saying they plan to buy in this area over the next 12 months.

“It is clear investors are becoming more comfortable investing in alternatives as their understanding of such asset classes grows and, given the turbulent market conditions over recent years, they appreciate the increased level of diversification offered by alternatives,” J.P. Morgan Asset Management head of UK institutional Peter Ball said in a statement. “We continue to believe that hedge funds can offer the right investment solutions but it is key that investors are at ease with what they are investing in, which appears to be the case from the survey results.”

The research consisted of feedback from 25 completed surveys from public and private UK institutional investors.

To contact the <em>aiCIO</em> editor of this story: Paula Vasan at <a href='mailto:pvasan@assetinternational.com'>pvasan@assetinternational.com</a>; 646-308-2742

The lawsuit is the latest in a string of legal actions against Citigroup and other large US institutions from investors who lost money in the economic downturn.

(September 27, 2010) — Norway’s central bank, which manages one of the largest sovereign wealth funds on the planet, Norway’s $473 billion Government Pension Fund, has sued Citigroup and its executives for losses.

Norway’s central bank sued Citigroup as well as 20 current and former Citigroup executives and directors, including the current chief executive, Vikram Pandit, and his predecessor, Charles Prince, over $835 million in losses in Citigroup stock and bonds. According to the complaint posted by the New York Times’ Dealbook, Citigroup misrepresented its financial condition and failed to disclose material information. The suit, filed on September 17 in United States District Court in Manhattan, accuses Citi of making “repeated material untrue statements and non-disclosure of material information to investors” between January 19, 2007 and January 15, 2009 that caused Norges Bank to purchase the securities at inflated prices.

The lawsuit is the latest in a string of legal actions against New York-based Citigroup and other large US institutions from investors who lost money in the financial crisis. Last year, for example, the Abu Dhabi Investment Authority (ADIA) filed an arbitration against Citigroup, accusing the US bank of misleading the fund when it invested more than $7.5 billion in 2007.

“Citi’s near-demise had its genesis in the company’s increasing willingness to take on risk for the sake of profit, without regard for — and without disclosing — the magnitude of the downside exposure it faced if those risks materialized,” the bank said in the complaint.

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Citi denied the allegations. “We believe the suit has no merit and will defend ourselves vigorously,” a Citigroup spokeswoman said in a statement.

The Norwegian fund, into which the country invests its oil wealth for future generations, lost 23% of its value in 2008 as global markets tumbled. However, it has since recovered most of its losses.

To contact the <em>aiCIO</em> editor of this story: Paula Vasan at <a href='mailto:pvasan@assetinternational.com'>pvasan@assetinternational.com</a>; 646-308-2742