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Highlights From The Annual Morningstar/Barron’s Hedge Fund Investment Survey

surveyNew York (HedgeCo.Net) –  The latest results from the annual Morningstar/Barron’s hedge fund investment survey examining the perception and usage of alternative investments among institutions and financial advisors is out today.

Among the findings:

  • Mutual funds are becoming the dominant vehicle used by both advisors and institutions to access the majority of alternative strategies. While 61 percent of institutions said they accessed long-short strategies via hedge funds in 2010, for example, only 26 percent indicated that they used hedge funds for that strategy this year. In contrast, more than 45 percent of institutions said they access long-short strategies via mutual funds versus 38 in 2010.
  • Among institutions, the number of “heavy users” of alternatives seems to be growing. More than 20 percent of institutions, compared with 17 percent last year, said they expect alternative investments to make up more than 40 percent of holdings over the next five years. Only 4 percent of advisors said their typical client had no money in alternative investments, down from 17 percent in the 2008 survey.
  • Institutions again flagged long-short equity strategies as their top choice for increased allocation. Advisors expressed particular interest in yield-producing alternatives like private real estate and MLPs.
  • High fees have overtaken liquidity and transparency as the primary reasons why advisors and institutions may choose to forego alternative investments.

“Alternative mutual funds and ETFs have grown in breadth and quality in recent years,” Nadia Papagiannis, director of alternative funds research for Morningstar, said. “Institutional investors are starting to see alternative mutual funds as substitutes for hedge funds, and more financial advisors are incorporating these liquid, transparent investments into their client portfolios.”

Morningstar and Barron’s conducted the survey in March 2013 and received responses from 235 institutions and 471 financial advisors.

Alex Akesson
Editor for HedgeCo.net
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