Poor, beaten down hedge fund managers forced to live off of paltry management fees… your day in the sun is returning:
Deutsche Bank, which estimates hedge funds’ assets to total about $1.5 trillion, expects the industry to add $222 billion in new money this year, based on its eight annual alternative investment survey. That would leave the industry less than $200 billion short of its 2007 peak of $1.9 billion.
Some 73% of survey respondents expect hedge funds to see inflows of more than $100 billion this year. Almost no one—less than 2% in the survey of 606 investors with more than $1.07 trillion in hedge fund assets—expects a third consecutive annual outflow.
The same goes for under-hyped Asia… get ready for the liquidity surge:
Much investor attention is focused on Asian hedge funds. Almost half of investors say they’ll pour money into Asia ex-Japan funds this year, while the number of those who do not allocate to the region fell to just 13% from 38%. Three-quarters of investors expect to allocate to China this year, and more than one-quarter say they’ll add to their Chinese hedge fund investments this year.
The money, if indeed it comes, will have to go somewhere.
So think Asian big caps, of which in many smaller markets, there are too few to accommodate major surges of liquidity… which means blind buying could easily happen because funds will need to deploy capital into their assigned markets as investor inflows pour in. We’re not saying this is smart, but it’s happened before (2007), and if Deutsche Bank’s survey plays out, it can happen again.