Hedge funds can expect $1b injection: UNSW

Hedge funds will secure a further $1 billion from superannuation funds over the next five years, as the average super fund allocation to the vehicles rises from 2.5 to 3.5 per cent, a University of NSW (UNSW) survey has found.

The ‘Hedge Fund Survey of Australian Superfunds’, commissioned by the Australian chapter of the Alternative Investment Management Association (AIMA), found that the surveyed super funds, representing more than $100 billion in funds under management, would steadily build upon their allocations to the vehicles in a two-to-five-year window. The average allocation was found to be 2.5 per cent of funds under management, and non-regional, global strategies were preferred. While 70 per cent of super funds surveyed invested in hedge funds, 90 per cent expected to allocate to the vehicles in the two-to-five-year window. Kim Ivey, the chair of AIMA Australia, said the findings showed that super funds held “consistent” levels of confidence in hedge funds since a similar survey two years ago – despite the notorious breakdowns of Basis Capital and Absolute Capital last year. Hedge funds supplied by institutional managers, as opposed to boutiques, were favoured by almost 65 per cent of respondents. The survey found that boutiques were “not securing any worthwhile market share”, and had attracted only 6 per cent of allocations from the funds surveyed, the report stated. When inspecting hedge funds, respondents sought a broad array of skill among the team members running the vehicles, and their operational and business experience. The survey covered trustees from major super funds and was conducted in the first quarter of 2008 by the UNSW Business School.