Could hedge funds be losing their appeal?
The popularity of hedge funds is declining, according to a new survey by Morningstar. The investment fund research firm found that almost 50 percent of financial advisors expect hedge funds to become a less significant part of investors' portfolios over the next five years.
Concerns were expressed over the transparency of hedge funds and the high fees that are levied on investors, while advisors also cited a lack of liquidity and difficulty accessing money locked up in hedge funds as reasons not to invest.
According to Reuters, the value of assets held in hedge funds has doubled to £1.1 trillion over the last three years as wealthy investors have poured their money into the sector. However, citing data from Hedge Fund Research, the news provider claims the average fund is down 20 percent this year.
But Morningstar's survey shows that one-quarter of financial advisors still expect them to play an equally important, or indeed more valuable, role in people's investment strategies going forward.
Steve Deutsch from the firm told Reuters that investors "want the best of both worlds" and will therefore continue to invest in hedge funds alongside traditional asset classes such as stocks, bonds and mutual funds.
A recent survey by the National Association of Pension Funds shows that pension funds have increased their hedge funds holdings from one percent in 2006 to 1.9 percent in 2008.
