Amy Bensted
Amy Bensted

Institutional Investment in Foreign Exchange hedge funds

At Preqin, through our daily conversations with investors, we constantly monitor institutional appetite and demand for hedge funds. We currently track over 2,200 institutions active in the asset class on our subscription database “Hedge Fund Investor Profiles”. Of these, 15.2% have stated a preference for foreign exchange specific hedge funds, with even more investors considering the area through macro and multi-strategy holdings. We predict that this area will grow further in 2009 as investors move their capital out of under-performing strategies into more liquid and flexible hedge fund strategies. Over the first quarter of this year we conducted a survey on behalf of e-FOREX to find out more about institutional demand for FX hedge fund products and the likely growth of this industry in 2009.

We surveyed over 50 institutional investors that have some exposure to FX products through their hedge fund holdings – these investors ranged in size from USD 300 million to USD 15 billion in assets under management. We surveyed investors from across the globe representing many different types of institutions including endowments, pension plans and fund of funds. Using our database of institutional investors we found that most investors were making their first allocations to the FX market at the beginning of 2007. When the majority of non-fund of funds investors made their initial allocation to FX, this was mostly coming via a multi-strategy fund of funds or via a foreign exchange exposure within a global macro mandate. What we are now witnessing is a growth in allocations to niche focused FX vehicles – with institutional investors using direct fund investments to pinpoint exposure to the opportunities that foreign exchange investment has to offer.Will institutional investors be making...continued

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