How happy are institutional investors with their allocations to hedge funds? Try perfectly satisfied, according to State Street‘s 2005 Global Absolute Return Congress report. “Our study reveals hedge funds are meeting institutional investors’ expectations with an astounding 100% satisfaction rate in achieving portfolio diversification as well as high marks for lowering portfolio volatility and increasing absolute return,” says Gary Enos, executive v.p. and head of the firm’s alternative investment servicing business. Institutional investors of all stripes have become comfortable with hedge funds, as 81% have put at least some money in them, with 48% allocating 5% or more of their total assets, and nearly half of those (44%) investing 10% or more. In contrast, only 35% were members of the 10% club last year. Private equity is also catching on in a big way, with 90% allocating some money, and about half of them investing 5% or more. “All signs indicate that what began as a niche category catering mainly to mainly to high-net worth individuals and U.S. endowments and foundations has become a permanent fixture within a broader set of institutional portfolios,” says Enos of alterative investments.
