High management fees put 38 per cent of pension schemes off investing in hedge funds, according to a new survey by AMX.
A further 34 per cent believe that a lack of transparency regarding additional costs hinder them when investing in hedge funds and 41 per cent expect increased scrutiny from pension schemes on fees paid to hedge funds.
AMX global head, Oliver Jaegermann said: “With pressure to reduce costs in the industry, many pension funds may naturally steer away from high management fees, leading to lower investment in hedge funds. By increasing transparency surrounding costs and fees, and streamlining these to increase cost efficiency, we believe we can encourage pension decision makers to consider investing in hedge funds.”
The research surveyed 200 individuals with investment responsibilities for pension schemes and discovered that 32 per cent found insufficient risk reporting an investment obstacle.
Furthermore, 26 per cent cited difficulty of comparing fund performance an obstruction in investing in hedge funds, while a further 25 per cent cited an inability to govern individual funds.
AMX’s study found that pension decision makers are expecting increased scrutiny on hedge funds, including: costs incurred (40 per cent), the security of investment assets (36 per cent), transparency regarding risks within each hedge fund investment (31 per cent), knowing the overall risk across all hedge fund investments (31 per cent) and the net returns generated (30 per cent).
Jaegermann concluded: “In addition to increased scrutiny surrounding costs and fees, security and risk are also key areas of concern when it comes to investing in hedge funds. Clearly this is an issue which needs to be rapidly addressed in order to provide pension decision makers with the confidence to invest in these assets.”