Institutional Investors Hold Majority Of Hedge Fund Assets

High-net worth investors, long the cornerstone of the hedge fund industry’s client base, are no longer its most important client group.

Institutional investors now account for the majority of hedge fund assets. Institutional investors make up about 55% of the hedge fund industry’s asset base, a dramatic increase from just a few years ago, when they accounted for about 40% of hedge fund assets.

What brought about the change? The economic crisis and battering that hedge funds took last year, along with the fear stoked by the Bernard Madoff scandal, forced or led many individual investors to pull their assets from the industry. In something of a vicious cycle, that has led to an “institutionalization” of the hedge fund industry that will cause many high net-worths to shy away.

The typical buyer is becoming more sophisticated such as institutional investors, the high net-worth individual can’t engage in the same way.