PHILADELPHIA, June 4, 2008 (PRIME NEWSWIRE) -- Expect institutional investment managers to increase their hedge fund allocations 25 to 50 percent over the next couple of years, says Christopher C. Geczy, PhD, academic director of the Investment Management Consultants Association (IMCA) Alternative Investments Certificate program at the Wharton School of the University of Pennsylvania. Investors are often searching for diversification in these investments, he says.
Recent high-profile hedge fund meltdowns, "do not immutably change the longer-term outlook," according to Geczy. "You'd expect a certain proportion of failures -- including some spectacular failures -- in a universe that now includes roughly 15,000 funds. But hedge funds are not necessarily riskier as a group just because some fail," says Geczy, who also is an assistant professor of finance at Wharton.
Institutional investment managers today place about 10 percent of their portfolios in hedge funds, up from five percent just two years ago. Over the next two years, that allocation will likely rise to between 12.5 and 15 percent of their portfolios, Geczy projects.
Infrastructure will be one hot AI area over the next couple of years, Geczy says. It proved one of the notable topics addressed at the recent IMCA program at Wharton. Much of that investment will go outside the U.S. because, "investors have a fairly hard time accessing U.S. infrastructure investments," Geczy notes.
Michael Parker, managing director of Jeffrey Parker & Associates Inc. and a presenter at IMCA's program at Wharton, notes that in the U.S. transportation infrastructure sector, only two major deals were reported in all of 2007. The U.S. faces "a huge need for investment in transportation infrastructure, but there's still a lot of political uncertainty in the near term as to what percentage of that will be done through municipal debt and traditional public finance versus transactions that involve private equity and management of those assets," Parker says. His company is a leading advisor on finance and public private partnerships for highway, mass transit and intermodal infrastructure.
IMCA's Alternative Investments Certificate program -- a two-month long pre-study followed by a five-day course onsite -- helps financial advisors, wealth managers and institutional consultants develop a more in-depth understanding of AI. "Especially in these days of gyrating stock markets, clients are looking for other investment havens," says IMCA Executive Director Dede Pahl.
Other program presenters included Patrick C. Egan, founder and CIO, Attalus Capital; David E. Lees, senior partner of myCIO Wealth Partners LLC, a consulting firm specializing in analyzing AI; and David J. Martinelli, managing partner of Harvest Fund Advisors LLC, which invests in petroleum infrastructure.
Lees, who analyzes AI for institutions, endowments and high net worth individuals, and whose firm consults on some $5.9 billion worth of investments, comments, "The rewards of being in alternative investments are very compelling, but the risk of choosing wrong, and potentially losing substantial amounts of capital, has also increased versus other investments," says Lees. "If you chose well, you can do very well, if you chose wrong, you can do substantially worse than average."
Martinelli stresses that, "There are alternative investments that don't involve aggressive, 'black-box', high-risk oriented investing." Harvest Fund Advisors invests in Master Limited Partnerships in petroleum processing and distribution infrastructure, a sector he says has traditionally been "a very safe and steady investment" because of the utility nature of the business.
Egan, whose firm runs a $3 billion fund of hedge funds for institutional clients, says institutions increasingly are moving into "active management" of alternative investments -- in order to achieve the actuarial rate of returns needed to pay for their employee's retirement.
IMCA and Wharton have partnered for 20 years to provide rigorous educational programs for investment consultants. Wharton conducts IMCA's Certified Investment Management Analyst(sm) (CIMA(r)) program as well as its Alternative Investments, Investment Strategist, and Endowments and Foundations advanced certificate programs.
About Executive Education at the Wharton School
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About the Investment Management Consultants Association (IMCA)
Based in Denver, CO, IMCA was established in 1985 to deliver the premier investment consulting and wealth management designations and world-class educational offerings-membership, conferences, certificate programs, and publications. The cornerstone of IMCA is the Certified Investment Management Analyst(sm) or CIMA(r) designation, the only advanced designation designed specifically for investment consultants. IMCA also delivers the advanced designation for wealth management professionals working with high-net-worth clients, the Chartered Private Wealth Advisor(sm) or CPWA(sm).
IMCA(sm), Investment Management Consultants Association(sm), and Certified Investment Management Analyst(sm) are service marks of the Investment Management Consultants Assn. Inc. CIMA(r) and CIMC(r) are registered certification marks of the Investment Management Consultants Assn. Inc. CPWA(sm) and Chartered Private Wealth Advisor(sm) are pending certification marks of the Investment Management Consultants Assn. Inc.