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30 April 2012

Towers Watson: Hedge fund investing - opportunities and challenges


This report aims to provide insights for institutional investors with direct hedge fund portfolios, or those considering investing directly in hedge funds. It offers practical analysis and advice about how to structure investments, as well as about the investments themselves.

Since Towers Watson began researching hedge fund strategies in the late 1990s, it has witnessed considerable changes in both the industry and markets. Economic and financial crises combined with extreme volatility and difficult liquidity conditions have challenged the way in which many investors construct their portfolios. The market extremes have even caused some to question the viability of a number of investment approaches.

Despite all this, Towers Watson has seen robust interest in, and increasing allocations to, hedge fund strategies as investors continue to view them as value-adding components of portfolios, providing diversity as well as attractive risk-return propositions. Assets under management in the hedge fund industry hit US$2 trillion at the end of 2011 and a recent survey expects this number to increase to around US$2.6 trillion by the end of 2012. While this number is open to debate, one thing is clear: hedge funds continue to attract the interest of institutional investors and a steady flow of assets into direct hedge fund strategies is seen. The fund of hedge funds (FoHF) model, however, continues to experience headwinds.

Press release

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© Towers Watson


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