Hedge fund investors put planners in the backseat
Nearly half (47 per cent) of first time retail hedge fund investors involve a financial planner in the transaction, according to a new Macquarie/Investment Trends Alternative Investments report.
However, Investment Trends principal Mark Johnston said most first time hedge fund investors see the planner’s role as “consultative rather than directive”.
“They like to believe they’re in the driver’s seat.”
Johnston’s assessment tallies with another key finding of the new survey; only 5 per cent of first-time retail hedge fund investors were primarily motivated to do so by professional advice.
By contrast, 44 per cent of first time hedge fund investors were motivated by a desire to broaden their portfolio/diversify risk, while 38 per cent were in search of higher returns.
The survey of more than 5,000 retail investors (conducted between September and December last year) also found first time hedge fund investors usually start out by using another kind of alternative investment.
“Only 20 per cent of advised investors and 15 per cent of direct investors who use hedge funds said this was their first form of alternative investment,” Johnston said.
Popular starting points for investors who end up using hedge funds were found to include capital guaranteed products, private equity and unlisted property.
Hedge fund investors are far more likely than other investors to value capital guarantees in their other investments (consistent with their absolute return focus in hedge fund investing).
Nearly 40 per cent of hedge fund investors in standalone hedge funds also utilise fund of hedge funds (FOHF), and also commonly have high levels of income and assets.
In general, the survey found the number of retail investors allocating funds to alternative investments has doubled in the past five years.
For respondents using a financial adviser, listed investments, capital guaranteed products, infrastructure and private equity were shown to be the most popular alternative vehicles.
In addition, respondents using an adviser had higher exposure to more investment categories and financial markets than those who invest directly.
Among those with a planner, 45 per cent of respondents had a self-managed super fund and generally had more funds to invest.
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