AIMA Survey of Superannuation Funds
AIMA has published an update to its 2004 survey of superannuation funds. The results are posted to its website. Click here to review. In summary while the survey published in 2006 (see my earlier post titled "Australian Superannuation Funds use of Hedge Funds") had indicated that superannuation funds were planning to lift their weight to hedge funds in coming years, in fact in the event 2008 weights were little changed from the weights in 2004.
Given that generally capacity is not a limiting factor the likely reason is likely to be simply the time it takes to implement change or the difficulty coming to terms with (understanding) the opportunities available.
One notable change was the introduction in some respondents of dedicated staff of up to 5 people whose job it is to monitor and evaluate alternatives. This suggests that the forecast increase in weight (from around 2.5% to 3.5% on average) will likely occur over coming years, although the new target is lower than when the last survey was taken.
In terms of quantum, 20% of 200 funds invited to respond did respond. These funds were biased to large funds and represented approx $100 billion of superannuation savings. An increase of 1% would thus add about $1billion to hedge fund investments.
More than 30% of responding hedge funds had allocations in excess of 5%. Reflecting the nature of the respondents, these investments were primarily global and invested with large institutional fund of fund providers. The allocation to Australia was only 10.6% and to boutiques (single or multi strategy) was very small (5.6%). Fund of funds are expected to lose market share compared with single/multi strategy funds in coming years, but not markedly.
Funds regard operational experience, team breadth and business experience most highly (expertise), ahead of transparency and governance and certainly ahead of the brand value of the firm.
Most interest was expressed in long/short equity, distressed and emerging market strategies.
While advisers have the most influence in the hedge fund allocation decision, the survey didn't cast any new light on the role they play.
by Rich Steele