Pension Funds to Test Hedge Fund Strategies, Finds State Street

Pension funds are expected to increase their exposure to hedge fund strategies over the next five years, according to a global survey commissioned by State Street of 235 hedge fund professionals.

It found 55% of respondents expect pension funds to venture into hedge fund strategies, with this figure increasing to 63% when respondents were asked more broadly about institutional investors.

The majority of respondents said the reason for this drive will be the performance challenges facing investors’ portfolios, while 35% believe it will be a growing focus on portfolio diversification.

“Despite the challenges facing the hedge fund industry, our findings show that many working in the sector are optimistic about its future prospects,” says Maria Cantillon, global head of alternative investment solutions sales, State Street.

“This is being fuelled by challenges facing asset owners as they search for better returns and greater diversification. The hedge fund industry is maturing and becoming more transparent and competitive.”

Furthermore the study found that hedge fund managers are still undetermined over the impact of Basel III. In which 29% of respondents believe it will have significantly increase their firm’s cost of financing, compared to 42% who say it wouldn’t and the remainder saying they do not know.