Canadian Institutional Investors Investing in Hedg

Still the actual amount invested in hedge funds is small. John Webster, a consultant at Greenwich said, “Private equity holdings by pension funds are almost unknown outside the United States and represent approximately 1% of total fund assets in Canada.” Total market assets invested in hedge funds totals 0.9% by plan sponsors, according to the research report.

Another investment trend is the increased use of derivatives, becoming a well-established investment tool with more than half of the funds surveyed reporting investments in derivatives, up from only 38% four years ago.

The ways in which derivatives are used vary. A total of 13% said they invested directly in derivatives to implement investment decisions such as changing asset allocations and country allocations. The remaining 87% said they do not invest directly but allow derivatives to be used by their outside managers.

A total of 20% allow the use of derivatives at the manager’s discretion, and another 20% said that derivatives used by outside managers is to achieve additional foreign exposure above and beyond the 30% foreign property limit in Canada.

Greenwich recently released the results of its survey: European institutional investors plans to move into hedge funds.