18/05/2011 Author: Shannon Hawthorne

Consultancy role vital in institutional choices

Investment consultants are playing an increasingly pivotal role in shaping institutional allocations to hedge funds, key industry figures told HFMWeek.

With a growing number of institutional investors currently making their first foray into the sector, many are heavily reliant on the advice of their investment consultant when deciding on firms in which to invest.

“Consultants play a vital role in providing unbiased guidance to investors who may not have the breadth of experience to navigate the large universe of managers and strategies,” Tom Wiggin, a partner at Cheyne Capital, told HFMWeek. “Being on a consultant’s approved list is a vital step for a hedge fund seeking to increase inflows from the pension fund community.”

According to representatives from Towers Watson, Aon Hewitt and Mercer, transparency and an institutional infrastructure are two of the key criteria managers must meet to receive a top rating from a consultant.

“A manager can be ruled out if they don’t meet the criteria from an operational due diligence perspective, even if we like them from an investment standpoint,” said Craig Stevenson, senior investment consultant, manager research at Towers Watson.