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December 6, 2005
Use of hedge funds by wealthy is seen growing
Hedge funds and other alternative investments are an important tool for wealthy investors provided there is sufficient due diligence over the money managers, chief investment officer Leo Grohowski of United States Trust Corp. said on Monday.
Some of the biggest U.S. Trust clients, such as family offices, are putting as much as 50 percent of their money into alternative investments, Grohowski said.
The alternative investments include hedge funds, private equity and venture capital.
The typical high net worth clients of U.S. Trust are currently putting about 10 to 15 percent of their money into alternative investments. Grohowski said he sees that moving tup to the 20-30 percent area.
That allocation would be roughly a mid-point between the 10-15 percent allocation and the 30-50 percent allocation that ultra high net worth investors counseled by U.S. Trust subsidiary CTC Consulting are using.
U.S Trust advocates a fund of funds approach to alternative investing, with money allocated to six to eight managers who are constantly monitored.
Grohowski sounded a note of caution, saying that some managers who had mediocre records running long-only funds under tight constraints have moved into the hedge fund arena where there are fewer restrictions.
But he said that with the proper due diligence alternative investments can deliver the kinds of returns investors want.
"We're true believers that it's not a fad," he said.
Grohowski spoke at a meeting with journalists where he discussed the 2006 investment outlook.
He said the environment appears "equity friendly" with U.S. gross domestic product likely to be in the area of 3.5 percent next year.
He also said the recent outperformance of growth-style equities over the value-style is likely to continue.
U.S. Trust, a subsidiary of Charles Schwab Corp. (SCH.N: Quote, Profile, Research). had $107 billion under management at the end of September.
-Reuters-
Posted by su at December 6, 2005 8:59 AM