Many institutional investors have a love-hate relationship with funds of hedge funds — if our most recent survey is any indication. On the one hand, funds of funds are a popular way for pension funds, endowments and other institutions to access hedge funds; on the other, not everybody is thrilled by the quality of due diligence performed by fund-of-funds managers. Portable-alpha programs, which generally rely heavily on leverage, also have their skeptics.
What type of institution do you represent?
Corporate pension fund 26.4%
Public pension fund 26.4
Taft-Hartley pension fund 1.4
Endowment 43.1
Foundation 2.8
What is the size of your fund?
More than $5 billion 30.0%
$2.5 billion to $5 billion 27.1
$1 billion to $2.49 billion 12.9
$500 million to $999 million 12.9
$100 million to $499 million 11.4
Less than $100 million 5.7
Do you currently invest in hedge funds or funds of hedge funds?
Yes 67.6%
No 32.4
If not, are you considering investing in hedge funds?
Yes 9.1%
No 90.9
If you do invest in hedge funds, how big is your allocation?
More than 50 percent 7.1%
26 to 50 percent 11.9
16 to 25 percent 14.3
11 to 15 percent 11.9
6 to 10 percent 19.0
Less than 6 percent 35.7
Do you currently invest in funds of hedge funds?
Yes 51.2%
No 48.8
Do you currently have a portable-alpha allocation?
Yes 17.9%
No 82.1
If you invested in funds of hedge funds in 2008, how did they perform relative to individual hedge funds?
Better 42.1%
Worse 5.3
About the same 52.6
If you invested in funds of hedge funds in 2008, how did they perform relative to equity markets?
Better 81.3%
Worse 12.5
About the same 6.3
If you have, or have had until recently, a portable-alpha allocation, how did it perform in 2008?
Worse than expected 100.0%
Has your view of the fund-of-funds industry changed during the past year?
Yes, it has improved. 6.3%
Yes, it has worsened. 43.8
No, it is about the same. 50.0
How would you rate the due diligence done by the fund-of-funds industry?
Excellent 6.9%
Good 24.1
Average 37.9
Poor 24.1
Extremely poor 6.9
Are you more or less likely to consider investing in funds of hedge funds today than one year ago?
More likely 9.1%
Less likely 33.3
About the same 48.5
I would never invest in a fund of hedge funds 9.1
Are you more or less likely to consider a portable-alpha program today?
More likely 9.4%
Less likely 43.8
About the same 40.6
I would never invest in a portable-alpha program. 6.3
Which is the best way to invest in hedge funds?
Directly 48.3%
Through a fund of hedge funds 48.3
Through portable alpha 3.4
Note: Responses may not total 100 percent because of rounding.
