Hedge funds and Private Equity - PES

Corporate investors 5%
Private individuals 6%
Government agencies 10%
Capital markets 1%
Academic institutions 3%
Insurance companies 11%
Sources of new funds raised
Other 9%
Funds of funds 13%
Pension funds 24%
Banks 18%
One of the best surveys to demonstrate the involvement of the pension funds and insurance funds
in the alternative field is the last Russell survey on Alternative Investing, dated 2005 28 . This survey
analyses the investment habits of 327 organisations worldwide responsible for managing taxexempt
assets. The greater part of the sample is pension schemes (the minority are endowments
and foundations). The evolution of such investment in Private Equity is shown in the table below.
Current and Forecast Mean Strategic allocation
to Private equity made by pension funds
2001 2003 2005 2007
US 7.5% 7.5% 7% 7.6%
Europe 3.6% 4.0% 4.5% 6.1%
Japan N/A 1.8% 1.8% 4.5%
Analysing the above figures we can state:
US players are leading the growth of the alternative investing among the institutional investors
and mainly among pension funds.
This investment practice seems more suitable to US investors, and anyway in this geographical
area such investments are not in an expansion phase (from 2001 to 2005 they ranged
from 7.5% to 7.0%). The catch up dynamic of European and Japanese investors to the US
standards seems weak.
At a first glance, the reported figures do not seem worrying in terms of the financial safety of
the subscribers (stakeholders) but as indicated, the high debt activities are creating financial
market concerns.
28 See under Executive Summary at:
http://www.russell.com/II/Research_and_Resources/Alternative_Investing/Alternative_Investments_Survey
Source: EVCA/PWC/Thomson Financial
Part I – Hedge funds and private equity funds – how they work
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