Hedge funds which exploit natural resource themes are used by just a small proportion, 2.9%, of the investors on Preqin’s Hedge Fund Investor Profiles database. Currently used predominantly by funds of funds in order to tap into underexploited sources of alpha, natural resources hedge funds are beginning to gain investor traction in other areas of the institutional market as they look to diversify their hedge fund holdings. For instance 17% of the current investor base in these types of funds are public pension funds, with a further 11% of natural resources investors being represented by endowment plans. It tends to be the larger, more established groups of institutional investor which are allocating capital to natural resources within their hedge fund portfolios. Current mean allocations to hedge funds of a natural resources investor stands at 14% of total assets which exceeds the mean hedge fund allocation of non-natural resources which stands at 11.6% of total assets.
89% of institutional investors active in natural resources hedge funds are based in the established regions of Europe and North America. However, although Asia and RoW based investors only currently represent a small proportion of global investors in these funds, this could increase in the near future as more investors from these regions take their first steps in the asset class. With a growing investor base in Rest of World and more funds launching to take advantage of the natural resources-rich economies of some of these emerging countries, we could expect an increasing number of investors to invest in funds utilizing opportunities within their domestic region.
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