Half of IFAs buying hedge funds are recommending them because clients have lost faith in traditional equities, research from independent pollsters reveals.
New research conducted by polling firm NMG Research shows that 54 per cent of IFAs recommending hedge funds are doing so because clients do not believe other funds can offer absolute returns.
The data, which was commissioned by Close Fund Management, shows that one in 10 IFAs has advised on hedge funds and 70 per cent have done so because they believe it spreads the risk.
But one-third did not think that having a hedge fund would reduce volatility of an investment portfolio.
The FSA has been under pressure from IFAs and fund managers for a decision on the regulation of hedge funds, the majority of which are domiciled offshore. Traditionally, they have been popular among institutional investors but, increasingly, asset managers have found interest among retail investors.
A three-year bear market and equities that are failing to beat the absolute returns of cash in trendless markets have further pushed investors tow-ards more niche modes of inv-estment portfolio.
Close Fund Management managing director Marc Gordon says: “There is a widening recognition in the UK that exposure to alternative investments, such as hedge funds, gives new investment portfolios. But to date, there have been few suitable products for IFAs to recommend to UK private investors.”