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March 6, 2007
Alternative goes mainstream as long-only dies
The move to more sophisticated investment strategies and the wide adoption of so-called alternative strategies as standard fare will result in the continued decline of traditional low-risk long-only mandates, according to investment consultants Watson Wyatt.
The new race for funds under management is instead being fought among unconstrained and absolute return investing, hedge funds and short-selling. The growth of private equity and alpha-hunting just drives the trends harder.
Tim Unger, senior investment consultant at Watson Wyatt, said, “Creating value through advanced investment strategies and the implementation of sophisticated risk-management programs are now top priorities for many institutional investment funds.
“This has resulted in funds moving some of their assets away from benchmark-sensitive approaches to make meaningful allocations to alternative assets and absolute-return products. In addition, a growing number of defined benefit and insurance funds are turning to the bond and derivatives markets to implement Liability Driven Investment (LDI) strategies.”
The investment management industry will continue to adapt to this new market environment and become even more focused on specialisation, he said.
Andrew Keevers, associate director of research at Rainmaker said a sting in the tail with these approaches however is that investment fees can often be much higher and easy consumer-friendly comparisons of funds becomes much harder.
“But to put this new style of investment into perspective, superannuation funds on average are currently only allocating around 6 per cent of the assets into these new strategies. Fund trustees still need to focus their attention on the main game.”
-Financial Standard-
Posted by su at March 6, 2007 2:01 PM