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Published on November 13, 2007

Writer Tom Wolfe said they clipped six-figure checks along with their children's applications to posh New England prep schools. Wolfe, who captured 1980s greed so aptly in "The Bonfire of the Vanities", summarised this new financial class as mostly "jerks" in his latest Vanity Fair article.

But Jeffrey Tucker disagrees. The founding partner of the Fairfield Greenwich Group (FGG), which has assets under management of US$15.5 billion (Bt525 billion), reckons that institutional investors will press for better hedge-fund operations, organisation and due diligence from these managers.

Institutional investors now make up about a quarter of the $1.8-trillion hedge-fund assets, said Tucker. The volume is likely to grow to a trillion or a 50-50 split by 2010, he added. These investors are mainly from labour unions, public and corporate pension funds, insurance companies, endowments and foundations.

University endowment is an interesting subject. Tucker believes that in the US many investment professionals sitting on endowment committees have made a strong impact on the endowments' returns.

Take, for example, the two prestigious science universities: the Massachusetts Institute of Technology and Imperial College London.

Both have produced Nobel laureates. But MIT has an endowment of $9.98 billion, while IC has $98.31 million.

Currently, institutional investors who employ hedge funds are still mainly from the US: 41 per cent, followed by Japan with 25 per cent. The UK and the Middle East have 8 per cent each.

But there are still stigmas in countries like China, where investors are quite wary as a result of the 1997 financial crisis.

Tucker explained that names like Longterm Capital and George Soros still "draw concerns". But now that Soros is no longer active and the principals of Longterm Capital were all dispersed, worries should dissipate.

Richard Landsberger, an FGG partner, said that hedge funds were able to attract investment because of their market-neutral approach and aggressive strategies which, for instance, involve longing undervalued stocks and shorting weak ones.

But the unregulated and discreet nature of hedge funds puts investors in the dark, said a source from the Association of Investment Management Companies.

The HFRI Fund Weighted Corporate Index, which has outperformed S&P 500 DRI since mid-2000, may not have taken in information that was comprehensive enough, or the funds may not have fully disclosed their data.

Thailand accounts for 1 per cent of FGG's $1.5 billion Asia-ex-Japan fund. Although the 30 per-cent reserve does not concern FGG, Landsberger that investment may rise in proportion to Thailand's gross domestic product within Asia.

As of now, the Securities and Exchange Commission bars Thai investors from investing in foreign hedge funds.

Ki Nan Tsui

 The Nation