Hedge fund fees hindering investment by pension schemes
High management fees are a key hindrance preventing pension schemes from investing in hedge funds, followed closely by a lack of transparency regarding additional costs, according to the latest survey by AMX.
The research by AMX, an open architecture marketplace for the buying and selling of asset management services, surveyed 200 individuals with investment responsibilities for pension schemes. It reveals that other obstacles to investing in hedge funds are: insufficient risk reporting (32 per cent), difficulty of comparing fund performance (26 per cent) and inability to govern individual funds (25 per cent).
Oliver Jaegemann (pictured), Global Head of AMX, says: “With pressure to reduce costs in the industry, many pension funds may naturally steer away from high management fees, leading to lower investment in hedge funds. By increasing transparency surrounding costs and fees, and streamlining these to increase cost efficiency, we believe we can encourage pension decision makers to consider investing in hedge funds – giving these pension schemes access to a wider range of options and opportunities.”
The survey also found that pension decision makers are expecting increased scrutiny from pension schemes on a range of hedge fund specifics, including fees paid (41 per cent), costs incurred (40 per cent), the security of assets in hedge fund investments (36 per cent), knowing the current risks within each hedge fund investment (31 per cent), knowing the overall risks across all hedge fund investments (31 per cent) and the net returns generated (30 per cent).
Jaegemann adds: “In addition to increased scrutiny surrounding costs and fees, security and risk are also key areas of concern when it comes to investing in hedge funds. Clearly this is an issue which needs to be rapidly addressed in order to provide pension decision makers with the confidence to invest in these assets. By providing increased transparency across all stages of the investment process as well as additional risk oversight and an enhanced view of risk exposure, we are well placed to ease these concerns and help to facilitate greater investment in hedge funds.”