Hedge funds “no less risky,” say UK investors
About half of UK investors now believe investing in hedge funds is no riskier, or even less risky than before the credit crunch, according to new research commissioned by Goldman Sachs Asset Management, unveiled yesterday
The view is shared by only 31% of their European peers. The remaining 70% Europeans perceive a greater, not a lower risk in allocating.
The Economist Intelligence Unit polled 289 retail and institutional investors, and their advisers, for the study.
Overall, the survey revealed a majority of investors feel investing in all major asset classes, with the sole exception of commodities, now entails some greater risks.
For each asset class, European investors expressed more concern than UK counterparts.
Sheila Patel (above), GSAM International co-chief executive, told Hedge Funds Review: “People see more risks, whether slight or significant, in bonds, equities, private equity, and property. People’s definition of risk has expanded very broadly, because they now realize they face different types of risk, not just the volatility and liquidity of their investments. There is operational risk in certain types of investments, too, in terms of practical aspects of how certain investments have to be managed.”
Notwithstanding this, 80% of UK investors and 56% of Europeans felt the crunch did not inflict any more damage on their portfolios than they had expected, and almost half British investors and 35% of Europeans believed the crisis and subsequent recession had “very little” or no impact on them.
Patel said: “It seems people have emerged from the crisis with a rather healthy mindset, regarding the ‘big picture questions’ about risk and their experience in the crisis. But what happened has in a more subtle way affected their perception of risk, particularly by asset class.
“People say they were not as impacted by the crisis, that they are willing to take on more risk to make higher returns that they will not have issues in meeting life goals. Corporates say their corporate plans are not deterred. But if you scratch under the surface, plans are indeed being changed, and growth markets are being factored into asset allocations.”
She said people’s positive perception of commodities may be tinted by prominent retainers of value such as gold, which form but part of the broader complex.
“Commodities is not a one-size-fits-all bucket. It may be, however, that people’s perception of commodities today is oriented towards things like gold, and as they look at the world now, those stores seem as, or less, risky than they once did, because of the destruction of value you have seen (elsewhere).”
Some 56% of trustees and CIOs and 73% of investment advisers polled feel the risk of investing in commodities has not altered or is lower than it was two years ago.
Their positive leaning may also be aided by the 14% appreciation in 2008 by CTAs, whose investment universe includes commodities.