NEW YORK/HONG KONG With the financial crisis seemingly safely in the past, investors around the world are ready to put new capital to work but these moneybags are treading with greater caution after taking it on the chin previously.
Investors are expected to take more time to select managers who are grappling with the specter of new regulation as well as macroeconomic concerns, executives at the Reuters Private Equity and Hedge Fund Summit said this week.
"What you will see now is the people who sat on the sidelines in 2009 will become more active this year," said Jean-Marc Cuvilly, a partner at Triago, which helps private equity firms raise money for funds and sells private equity assets for investors.
U.S. pension funds, eager to improve their returns after the recession, will be among the first to put billions of dollars to work beginning in a few months.
"U.S. pension funds that haven't been direct participants in the hedge fund industry are now working with hedge fund consultancies, looking for opportunities," said James Fallon, director at Bank of America Merrill Lynch, speaking about increased interest from U.S. pensions in Asia.
In January, global investors sent $4.51 billion in new money to hedge funds, hedge fund research and services company Channel Capital Group reported.
"There are a few checks being written, but most of money coming back is going to the big funds as investors look for safety in numbers," said Roger Pyrke, deputy chief executive with Triple A Partners.
Triple A Partners, a Hong Kong-based hedge fund distribution company which is also one of a handful of early stage investors based in Asia, said it is yet to see a "flood of money" pouring in even though the resilient Asian markets have been touted as the hotbed for new investments in 2010.
But against the backdrop of an uncertain economic recovery where investors remain worried about the high jobless rate and fledgling housing market recovery in the U.S., executives said finding and executing on new investments both on the private equity and hedge fund side may still take longer than normal.
With consumer spending in the U.S. still fragile, many executives are worried this will have a knock-on effect keeping businesses from being able to create new jobs.
"On the macro level there is still a higher level of uncertainty and that still requires higher levels of return," said Scott Sperling, co-president of private equity powerhouse Thomas H. Lee Partners LP.
Sperling and other private equity investors are still wary of the prices attached to some of the deals they see.
"We're still in a world where valuations are getting pushed pretty high," Sperling said, adding "If you look at past recessionary periods, you would have expected valuations to still be coming down."
Caution about deploying new capital has helped many of the world's biggest hedge funds pack on more assets, said Rosemary Fanelli and Ron Resnick, who founded regulatory consulting firm CounselWorks.
This means new hedge fund firms now setting up will have to "better funded than they used to be and be prepared to go it alone for longer" until investors are ready to come in, Rosemary Fanelli said.
Hedge funds in Asia gained close to 40 percent in 2009, far outstripping the growth in their U.S. and European counterparts, with funds focused on China topping the charts.
"There is a lot of interest in China, but investors are looking for top quality stock pickers in that market, and won't settle for the 'beta monkeys'," said Pyrke of Triple A Partners.
(For summit blog: blogs.reuters.com/summits/)
(Editing by Anshuman Daga)