The number of institutions investing in hedge funds through separate or managed accounts could more than double in 2010, according to new research from industry tracker Preqin.
In a survey of 60 institutional investors conducted in January, 16% said they already invest in hedge fund separate accounts and an additional 23% are considering making their first separate account investment in 2010. European institutional investors are more avid users of managed accounts than U.S. institutions: 19% of European institutions surveyed said they already invest in separate accounts, compared with 12% for U.S. pension funds, endowments and foundations.
Preqin's survey uncovered a bias toward separate accounts by large institutions, with 50% of funds larger than $1 billion indicating that they already invest this way, compared with 33% of funds with assets between $500 million and $999 million; 11% of funds between $100 million and $499 million; and only 6% of funds smaller than $100 million.
Preqin researchers wrote in their report on the survey that the reason for the bias is that large minimum investments and high managed fees dissuade smaller funds from using separate accounts. Indeed, cost was the most common reason given (38% of respondents) for not investing in separate accounts.
