Hedge Funds in Hiring Mode as Alternatives Gain Popularity
Institutional investors say alternative investments are no longer “alternative.” That’s according to the results of a recent survey by JPMorgan Asset Management, which examined the investment strategies and practices of some of the nation’s largest institutional investors. The study confirms that alternative investment strategies are now established components of institutional portfolios – and no longer “alternative.” In fact, the research shows there has been no overall pullback from these types of investments - even amid fears of recession and rising inflation.
As a result, executive search firm, A.E. Feldman, says that as investors boost their exposure to alternative investments, candidates who have a comprehensive understanding of the risks and benefits of the various asset classes and investment strategies are in growing demand. Hedge funds, in particular, are on the hunt for talent. According to a recent FT report, “The biggest hedge funds are on a hiring binge, taking advantage of cutbacks at investment banks to recruit star traders, senior executives and whole teams to help them expand.”
Alternatives have become an essential part of portfolio strategies for institutional investors, according to JPMorgan Asset Management. In a survey, the firm examined the investment practices of 191 of the largest U.S. institutional investors across corporate plans, public funds and endowments and foundations representing $1.26 trillion in assets. Endowments and foundations are leading the way in alternative investing with allocations accounting for over a third of portfolio assets by 2010.
Among the key findings: growth expectations remain strong - despite current market disruptions, dislocations, and sub-prime contagion. Moreover, average allocations to alternatives exceed 18% and are expected to exceed 22% by 2010 - an increase of more than 20%.
“While alternative assets have indeed become an essential part of the portfolio, continuous innovation will be required to meet the needs and appetites of institutional investors who will demand an increase in the availability and diversification of alternative offerings,” said John Hunt, CEO of Institutional Americas at JPMorgan Asset Management.
The survey also reveals a pervasive need among institutional investors to enhance and diversify returns drives growth, with a shift in allocations away from traditional assets toward alternatives. In fact, growth in average allocations is expected across all major alternative asset classes. The survey projects the two fastest growing strategies through 2010 will be private equity and absolute return/hedge funds.
Private equity growth will surpass all alternative asset classes, with 62% of current investors planning to increase allocations. Hedge funds/absolute return are expected to account for approximately 40% of net inflows into alternatives in the next two years.
Bottom line: alternative investments are currently meeting performance expectations despite concerns over falling returns, fees and liquidity concerns.
Investors Committed to Hedge Funds
Institutional investors remain strongly committed to hedge funds, despite last year’s downturn in performance, according to a recent study by Greenwich Associates and Global Custodian. In fact, hedge fund assets have grown to more than $2.9 billion, jumping 20% in the past year, according to the 9th biannual HFMWeek Hedge Fund Administrators Survey.
A recent Bloomberg report states, “Institutional investors like pension funds are putting more money into hedge funds, which aim to make money in rising and falling markets, even as the industry had its worst start to a year in 18 years, to boost returns after the U.S. subprime loan crisis.” The report also notes that Japan’s Pension Fund Association has lifted its hedge fund investments six-fold in less than a year as part of efforts to boost returns from a wider range of holdings on its $122 billion of assets. According to Bloomberg, the fund has put 300 billion yen ($2.8 billion) into hedge funds and aims to increase that to about 4% of total assets.
Hedge Funds Scooping up Talent
Many of the biggest hedge funds are still flush with cash, despite market turmoil, according to the FT. The report also notes that hedge funds “look increasingly appealing for staff at investment banks facing falling bonuses, a clampdown on expenses and widespread job losses.”
Mitch Feldman, President of A.E. Feldman, says hedge funds still need people to manage the trillion-dollar industry. He adds that emphasis on risk management jobs is building. Continued growth of assets under management at hedge funds is also opening doors for back- and middle-office staff. Opportunities exist in hedge fund accounting and administration as well as investment operations.
A.E. Feldman’s finance division is constantly researching industry trends and developments. To inquire about existing and future job opportunities in finance the lines of communication are open. Contact A.E. Feldman’s President, Mitch Feldman, and the firm’s expert financial recruiting team here.
