LONDON (Reuters) -The BlackRock Investment Institute believes investors should bulk up their exposure to hedge funds, the company said on Thursday.
The research arm of the asset manager suggests investors dedicate up to 5% of their portfolios to hedge fund investments, the highest the institute has ever recommended.
Investors might take money from holdings in developed market government bonds and instead use this money for less risky hedge funds, it said in a note.
Allocators comfortable with a bit more risk could take money from the stocks portions of their portfolios and instead redirect that money at higher risk hedge funds.
The asset manager side of BlackRock, which also acts as a middleman for investors wanting to spend money on hedge funds, oversees $76 billion in hedge fund assets including direct hedge fund investments and hedge fund-related businesses, the company website says.
U.S. President Trump in August signed a White House order directing regulators to expand access to alternative investments to 401k retirement portfolios, like hedge funds, adding a new layer of risk open to ordinary investors.
BlackRock, which lobbied the Trump administration to expand asset options, plans to launch its own retirement fund that includes private equity and private credit assets next year.
The broader hedge fund universe returned 1.1% in July and returns are up 5.2% so far in the year to July 31, figures from PivotalPath showed. Hedge funds are up roughly 8% over the past five years on an annualized basis.
The S&P 500 and Nasdaq stock indexes have both risen roughly 9-10% this year.
JPMorgan's global government bond fund was up around 2% as of July 31, it says on the bank's website.
(Reporting by Nell Mackenzie; editing by Dhara Ranasinghe and Hugh Lawson)
