Single-family offices moving forward on hedge funds

Advisers for ultra wealthy investors are bullish on hedge funds, with many planning to increase their allocations to the alternative investments next year, according to On the Rise survey. The study was co-sponsored by Red Bank, N.J.-based G Capital Management LLC and Rothstein Kass & Co. PC of Roseland, N.J.

A majority (58%) of single-family offices around the globe participating in the this study indicated plans to increase asset allocations in hedge funds for 2009. The study of 146 single-family offices was first completed in late August, before the Wall Street turmoil began in mid-September, and as a result, many of these firms were contacted again to see if their plans were changing. However, in the ensuing follow-up interviews, an even greater percentage (62%) said they would boost hedge fund allocations next year.

The September follow-up interviews also showed a change in single-family offices, saying that they would reduce allocations to hedge funds (11%), compared with 19% from the August survey. 27% of single-family offices at the end of September planned to keep hedge fund exposure the same, compared with 24% when the survey was taken the first time.

The single-family offices surveyed had investible assets ranging from $312.2 million to $1.3 billion, with a majority of the firms (58%) based in Canada and the United States.

Many high-net-worth investors are planning this alternative strategy due to a belief that the market's volatility will last well into 2009 and that hedge funds tend to perform better than other products. They want to avail themselves of any type of strategy that can mitigate risk. When there is blood on the street, it creates opportunities for them.