Hedge Funds, P.E. To Lead Search Growth In ‘07

Apr 12 2007 | 12:54pm ET

Investment consultants expect to see a sizeable increase in search activity this year, and alternatives will be their bread-and-butter.

According to a new Casey Quirk survey of consultants, while traditional equity searches will still generate the most search activity, more consultants will focus on hedge funds than any other strategy. More than half of survey participants said hedge funds will be one of their top search items in 2007, with 68% expecting an increase in hedge fund searches compared to 2006, and a quarter expecting a “significant increase.”

Private equity will also be a major focus, with almost a quarter of consultants identifying it as a primary focus. No consultant polled expected a decline in p.e. searches this year, and 44% said they expect to conduct more p.e. and real estate searches.

All told, consultants expect an 8% to 10% increase in search activity in 2007. Alternative asset classes hedge funds, p.e. and real estate are identified as “highest opportunity” areas, while portable alpha, 130/30 and 120/20 products are seen as “up and coming.”

The latter, 130/30 and 120/20, are much more likely to be the focus of larger consultants than smaller. The other major divide among consultants identified by Casey Quirk is between those advising public pension funds and those advising individuals. The former are much more likely to favor funds of funds, while the half of the latter prefer direct investing. Overall, 49% of respondents side with funds of funds, and just 19% with direct investing.


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