Monday, April 02, 2007

Affluent investors confused by hedge funds?

The article below discussing the lack of understanding of alternative investments by affluent investors is an interesting one. For all the billions and billions that are invested in hedge funds you would have thought that some of this money would have been spent on marketing.

A search on Yahoo for 'hedge fund' will bring up as number one, a hedge fund portal i.e hedge fund news. On the firt page of Yahoo, there is not one hedge fund. Same with Google, no actual hedge funds, just news sites, portals and blogs.

The thing is, isn't this the point? It appears to me that the hedge fund industry, if it is to attract the 'affluent' private investors (as oppossed to the institutional investors that dominate)then the mistique that the hedge fund industry creates by not being very good at marketing, is the very thing that will appeal to these investors?

However, taking the article below on board, we will be explaining the new Managed IPO and PIPE account shortly, just iron out a few wrinkles on the web site in an attempt to get our marketing right!!

Here is the article from PRNewswire

CHICAGO, March 28 /PRNewswire/ -- Even with all the recent media attention, hedge funds and other alternative investments remain little understood by affluent investors.

Just 18% of affluent investors, defined as having more than $500,000 in investable assets, say they understand hedge funds. Structured products are understood by only 15% of these investors and private placements come in at 19%, according to a new Spectrem Perspective(TM) report, "Alternative Investments: Are They a Priority for Affluent Portfolios?" released today.

At the same time, just 9% of affluent investors say they are interested in hedge funds. A similar 9% express interest in structured products, with 10% interested in venture capital, 11% in private placements and 11% in futures.

"While hedge funds have been in the news like no other financial product recently, affluent investors still don't feel they understand these alternative investments. This gap in understanding corresponds with a distinct lack of interest in hedge funds and other alternative investments such as structured products and private placements. Financial services providers offering these products need to be proactive in educating affluent investors about their risks and rewards. Given their lack of interest, it seems unlikely these investors will step forward themselves seeking more information," said Catherine S. McBreen, Managing Director of
Spectrem Group.

When asked which of five specific alternative products were the riskiest, affluent investors selected hedge funds (39%), followed by commodities (32%), precious metals (14%), private equity (8%) and REITS (7%).

The Spectrem Perspective(TM) report, "Alternative Investments: Are They a Priority for Affluent Portfolios?" is based on telephone interviews conducted in late 2006 with 514 affluent households, defined as those with more than $500,000 of investable assets. The margin of error is plus or minus 4.3 percentage points.

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