The Alternative Investment Management Association (AIMA) and the CAIA Association have jointly published the first of a series of hedge fund educational papers aimed at pension fund trustees.
The paper – “The Way Ahead: Helping trustees navigate the hedge fund sector” – sets out to give practical guidance about how existing investors have managed issues and challenges associated with their hedge fund investments as well as detailing the advantages of allocating to hedge funds.
The other papers in the series, to be released between now and Q1 2016, will cover such topics as hedge fund strategies, transparency and governance. They are being produced in collaboration with the AIMA Investor Steering Committee, a group of leading institutional investors globally with approximately USD150 billion invested in hedge funds.
Among the findings of the first paper:
• Roughly one in every four dollars managed by the global hedge fund industry today – well over USD700 billion in total – is invested by public and private pension plans, and this proportion is increasing
• Uncorrelated and risk-adjusted returns are among the most important objectives cited by investors who invest in hedge funds
• Investors have earned a combined USD1.5 trillion after fees from hedge funds in the last 10 years
Jack Inglis, AIMA CEO, says: “The global hedge fund industry has grown at approximately 10% a year since the financial crisis, and much of this growth can be attributed to increased allocations from public and private pensions. Hedge funds have become part of the mainstream, and today they manage over USD700 billion from pensions worldwide and well over USD2 trillion from institutional investors generally.
“But at the same time, many trustees are asking questions about their existing or prospective hedge fund allocations. Rarely has there been such demand for a realistic assessment of the benefits – and also the risks – associated with hedge fund investing. We hope that this series of educational papers which we are producing with CAIA will be considered by trustees as a trusted source and help them to improve their understanding of hedge funds at this important time in the industry’s growth and development.”
William J Kelly, Chief Executive Officer at the CAIA Association, says: “The alternative investing industry has experienced tremendous growth over the past decade and now finds itself at something of a crossroads. Continued growth and acceptance will depend greatly on the ability to educate investors not just on the fundamentals of the products, but also on the role these funds are designed to provide within an overall portfolio.”