IDEAS
FOR RELEASE
June 4, 2008
CONTACT
Kate Hendrickson—IMCA Communications Support Specialist
303.850.3079
Wendy Parsons
Wharton—Director of Marketing Communications
215.898.7239
Institutional Investment Managers Predicted to Increase Hedge Fund Allocations by 25 to 50 Percent over the Next Two Years
Portfolio managers see infrastructure as a high-growth category, notes panel at Wharton Executive Education’s Investment Management Consultants Association Alternative Investments Certificate Program
PHILADELPHIA—June 4, 2008—Expect institutional investment managers to increase their hedge fund allocations 25 to 50 percent over the next couple of years, says Christopher C. Geczy, Ph.D., academic director of 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 an onsite course—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 choose well, you can do very well, if you choose 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 AnalystSM (CIMA®) program as well as its Alternative Investments and Endowments and Foundations advanced certificate programs.
###
About Executive Education at the Wharton School
The Wharton School of the University of Pennsylvania—founded in 1881 as the first collegiate business school—is recognized globally for intellectual leadership and ongoing innovation across every major discipline of business education. The most comprehensive source of business knowledge in the world, Wharton bridges research and practice through its broad engagement with the global business community. Executive education at Wharton brings together over 10,000 executives each year from all corners of the globe in a partnership of learning. The best and the brightest business minds today tackle real-world issues in a highly collaborative environment.
Informed by in-depth, groundbreaking academic research and extensive industry experience, Wharton programs can span anywhere from a few days to a year or more. Each executive education program offers a supportive and challenging context where participants gain the skills necessary for their next level of executive development. Participants who come to Wharton from a diverse range of industries engage with faculty who are the most cited, most published faculty of all top-tier business schools. With a profound influence upon global business, Wharton faculty are the sought-after, trusted advisors of corporations and governments worldwide. For more information visit http://executiveeducation.wharton.upenn.edu.
