Friday, October 26, 2012

Hedge Funds Enhance Risk Management to Attract Institutional Investors Says Singapore Trade Minister

While the macro economic environment has left hedge funds grappling with volatile financial markets and an environment that has grown averse to risk taking, noted a Singapore senior financial regulator, the  long term prospects for the alternative investment industry remain positive. In recent remarks , Trade Minister Lim Hng Kiang, who is also Deputy Chair of the Singapore Monetary Authority, said that to meet the demands of institutional investors and global regulatory standards, hedge funds have enhanced their risk management and compliance functions. He cited a recent study by the Managed Funds Association, BNY Mellon and Hedgemark finding that 79 percent of global hedge funds now separate the roles of the risk manager and the fund manager, with 60 percent of the larger hedge funds having a dedicated risk management function. He believes that all this augurs well for the hedge fund industry, since it allows the industry to grow in a more sustainable manner with strong internal control systems and risk management oversight.

The Minister also noted that institutional investors have increased allocations to hedge funds significantly over the last decade, from only US$125 billion in 2002 to approximately US$1.5 trillion as of the end 2011. Looking forward, he also noted that institutional investors in the major markets have indicated their intent to increase allocations to almost all alternative classes, including hedge funds. In the Minister’s view, increased institutional participation will drive growth as hedge funds become an important part of the investment landscape.