Institutional Investor and Hedge Fund

In the recent years the relationship between the institutional investor and hedge funds has developed rapidly. A large number of institutional investors have invested in the hedge funds and so the assets managed by these funds are also increasing at a good rate.
According to several survey reports, it is quite clear that total assets under the management of the hedge funds are growing very quickly. The popularity of the hedge funds is a reason but at the same time, the institutional investors have played a major role in this development. The institutional investor and hedge funds are depending on each other for their growth.

The institutional investors have invested huge amounts in these funds in order to get high returns. In the present day financial markets, the traditional investment plans are becoming less productive.

These low yields from stocks and bonds have compelled the institutional investors to invest in the hedge funds so that they can get high returns. These funds are also providing the institutional investors with the option to manage their funding gaps.
Yet another reason of the rapidly growing relationship between the institutional investor and hedge funds is that the hedge funds help the investors to maintain a certain capital level. As a result of this, the market is expecting that the institutional investors will invest more than $80-90 billion in the hedge funds in the year 2008.

There are some other reasons that are also of same importance for the selection of hedge funds by the institutional investors. In the present market the institutional investors are much more concerned about the factors like uncorrelated returns and consistent returns etc. At the same time, the investment strategy followed by a particular hedge fund is also considered before selecting the fund for investment purpose. A very important factor in this respect is transparency and reporting because the institutional investors are always interested in the investing in an understandable strategy. The management of the hedge fund is also considered before making any kind of investment.

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Last Updated on : 5th July 2013