EUROPE/HEDGE FUNDS - European investment in hedge funds is expected to grow by around 500% in the coming years, with pension funds and insurance companies representing over three quarters of the new users of the asset class, according to research published today (August 9) by asset management research firm Sector Analysis.

The study, entiltled ‘Alternative Approaches European financial organizations’ demand for hedge funds and hedge fund of funds’ predicts a rise in the hedge fund holdings of European financial organizations of $182bn from its current level of $41bn to some $220bn, an increase of over 5 times.

While the report says the biggest contribution to this growth will come from existing hedge fund users, it adds that significant inflows will come from groups that have no exposure to the asset class.
The survey finds that among current non-users of hedge funds, 37% would consider investing in hedge funds in the future. Consequently, new users are expected to invest around $69bn in third party hedge funds in the future.

To this end, the report notes that many pension schemes and insurers are currently only waiting to see low-risk vehicles offered by the market before investing in hedge funds.

At the end of 2000, European financial institutions, as defined by Sector Analysis, invested around $41bn in third party hedge fund vehicles. The research firm notes that this is comparable to where the US hedge fund industry stood in the early 90’s, before experience the phenomenal growth of the last decade.

Sector Analysis says that while European financial organizations allocate on average 1.3% of their total assets under management to third party hedge funds, it believes the percentage will rise above 5% in the future.

Akram Ben, associate director at Sector Analysis and author of the report, comments: “Hedge fund products are getting more and more attention from European financial organizations. These organizations see hedge funds as a perfect tool of risk diversification and a way to protect themselves from the extremely volatile markets they‘ve been experiencing for more than a year now. Some of these organizations are convinced that the demand is out there and if they don’t include hedge fund products in their lineup they will probably lose some of their clients, which will directly benefit their direct competitors. Large asset management organizations along with universal banks are in the process of changing the European landscape. We think they are very well positioned to help bring the most cautious investor out of his shell. “

For further information contact:
Akram Ben
E: akram@sectoranalysis.co.uk
T: (1) 212 830 6192


Topics