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According to a report by SEI, in collaboration with Greenwich Associates, institutional investors have become more willing to invest in hedge funds, with more than one third of them – out of the 105 institutions surveyed – planning to increase target allocations over the next 12 months. The study, entitled 'The shifting hedge fund landscape: Institutions put fund managers to the test', also revealed that most respondents are focusing increasingly on non-correlated investment strategies.
However, this number is lower than in recent years, while institutional investors' standards for selecting fund managers are rising. The report pointed to a "real need" for hedge fund managers to help clients better understand their investment strategies, performance expectations and the trade-offs between risk and reward to maintain investor confidence and attract new capital.
Rodger Smith, managing director at Greenwich Associates, said: "Although returns are understandably a top objective, risk management also remains at the front of investors' minds". Three of the top four goals named by respondents – accessing non-correlated strategies, diversification and lowering volatility – address investment risks.
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