European family offices & foundations are experienced investors in hedge funds, many having started investing in hedge funds more than 10 years ago. This is reflected in average allocations of nearly 10% of assets to hedge funds, and relatively large portfolios of hedge funds. Wellcome Trust is one of the largest foundations investing in hedge funds, allocating 20% of assets, amounting to roughly $3.9 billion. On average, however, European family offices & foundations tend to be smaller than their US-based counterparts.
The hedge fund portfolios of European family offices and foundations include both single funds and multi-manager funds. Perhaps due to smaller scale, 54.5% invest in funds of hedge funds. This is largely reflective of many foundations seeking the diversification that they could not effectively implement on their own. On the other hand, half of family offices & foundations in Europe state they will invest in any hedge fund investment strategy. This flexibility comes principally from family offices.
The combination of a long-term investment horizon and a lack of scrutiny from trustees and boards, gives family offices investors the potential to be highly agile investors in hedge funds, with the ability to take greater risks and enter and exit investments rapidly.
Geographically-speaking, over 60% of these offices and foundations are found in the UK, Germany and Switzerland. Nearly two-thirds of these offices invest globally, with a majority also identifying European hedge funds as the preferred destination for their investments. A significant, and growing, percentage of the flexible family offices also invest in emerging markets hedge funds.
For more information on institutional investors in hedge funds, please see Hedge Fund Investor Spotlight June 2009
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