Survey: The Rich Say A Good Hedge Fund Is Hard To Find

Apr 25 2007 | 10:41am ET

With all of the money pouring into hedge funds these days, one would think that wealthy Americans would have a large chunk of their portfolios invested in absolute return vehicles, but that isn’t the case. According to a study just released by wealth management firm U.S. Trust, high-net-worth respondents—those Americans with over $5 million in investable assets— said that hedge funds make up only 2% of their portfolios. That figure jumps to 6% for ultra-high-net-worth respondents, who are defined as those with over $25 million in total assets.
But while respondents’ money isn’t heavily invested in hedge funds, the majority of HNWs do view hedge funds as delivering a very good ROI (55%). About half also believe that hedge funds reduce portfolio risk (51%). However, three out of four respondents agree that hedge funds are difficult to investigate (77%) and that a good fund is difficult to identify (76%).

“The findings reveal that there is still a limited understanding of hedge funds and other sophisticated products, even among Americans wealthiest households,” said Frances Aldrich Sevilla-Sacasa, president and chief executive officer of U.S. Trust. “More importantly, they also highlight the need for continued investor education around alternative investment vehicles and the importance of having unbiased advice.”

The U.S. Trust Survey of Affluent Americans is the 26th such survey to be conducted by the New York-headquartered firm, which has approximately $98 billion in assets under management.

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