Almost 80 per cent of respondents to a survey do not plan to alter their hedge fund allocation over the next year, and 15 per cent expect to increase them, reports SEI.

A survey by the global provider, in association with Greenwich Associates, also found that transparency and liquidity risk are the top concerns for institutional investors investing in hedge funds, surpassing worries over poor performance.

The Era of the Investor: New Rules of Institutional Hedge Fund Investing recommends that hedge fund management institutionalise responses to transparency demands, and demonstrate clear sources of alpha to retain and gain assets among the demanding institutional investor base.

"Investors remain committed to hedge funds but that commitment comes with increased expectations," commented Phil Masterson, managing director for SEI's investment manager services division. "The balance of power has clearly shifted and managers must meet the growing demand for transparency and increase their focus on operational effectiveness if they want to be successful in this 'Era of the Investor'."

When it comes to manager selection, respondents are more focused on the ability of the manager to identify and clearly explain the alpha source for the delivery of performance, and compliance infrastructure also came high up on the list - 50 per cent of respondents said this is 'very important'.

The survey also showed that, for fund managers to remain competitive, firms must proactively enhance their transparency and investor communications and reporting. There is also the opportunity for fund managers to add value by helping to educate the investment committees and boards of institutional investors, given that this was cited as the second greatest challenge to investors.

A white paper, published by the SEI Knowledge Partnership, provides ongoing business intelligence to SEI's investment manager clients. It is available here

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