In a scant two years, some of Europe's largest institutional investors intend to be much bigger investors in alternative investments than they were this summer, according to a new survey commissioned by the Alternative Investment Management Association, London.
Between June and September, 40% of 151 of Europe's largest institutions were invested in hedge funds; 80% are in real estate; 60% in private equity; and less than 10% in commodities. More than 50% of these investors use an active tactical asset allocation process, and 30% use such a process for currency management.
Of the funds that invest in hedge funds, the average allocation is 4%. The average private equity allocation is 2%, according to the survey.
By 2006, 60% of the same institutions said they will be invested in hedge funds, private equity, currency management and TAA. When it comes to currency management, more than 30% of respondents predict they will be using external managers by 2006, up from 10% now. And about 20% of the funds using TAA now said they will add managers or hire external managers within the next two years. The survey also found that Dutch and U.K. institutions will be doing the most hiring of external managers over the next two years, especially in hedge funds and currency management.