Advisers say hedge funds now mainstream

Advisers now regard hedge funds as a mainstream investment option for capital preservation and income growth and are supporting this view with their investment choices, according to an industry survey conducted byHedge Funds of Australia(HFA).

Of the 200 advisers surveyed, 69 per cent had invested in fund of hedge funds over the last 12 months and 95 per cent said they will invest in hedge funds over the coming year.

HFA managing director Spencer Young says, “This represents a fundamental shift in the habits of Australian advisers and investors who now recognise that hedge funds have moved beyond the speculative vehicles they were perceived as years ago.”

Advisers were also found to be disillusioned with traditional investments, with 92 per cent saying they had been dissatisfied with results in these areas.

The survey discovered that consistent performance, capital preservation and absolute returns were the most important aspects of investing to advisers in the current climate, with double-digit returns, relative return vs benchmark and tax effectiveness least important.

And while more advisers are embracing hedge funds, 92 per cent of respondents said their primary investment choice is likely to be the relatively conservative fund of hedge funds, because they are seen to be less risky or carry an equivalent risk to traditional managed funds.

With over half the advisers surveyed saying they still need to improve their knowledge of hedge fund strategies, Young has called on the industry as a whole to address the issue.

“The better educated the financial adviser, the higher the awareness of the choices available to investors. This will result in more effective construction of client portfolios,” Young says.