10 Insights On Hedge Fund Investment behaviour For The Next Year

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A new report by alternative investment research firm Preqin says that between $125 bn and $195 bn in new capital could be coming into the hedge fund asset class over the next 12 months. So where is all this money going to go? Below are 10 insights from Preqin’s most recent survey of hedge fund investors.

1. Funds of hedge funds targeted by investors: one third of investors surveyed by Preqin plan to make a commitment to hedge funds over the next year. Of these, 47 per cent say they are looking at funds of hedge funds.

2. For the public good: public pension funds are taking an interest in hedge funds – 36 per cent are looking to increase their allocations to this asset class in the next year, with more than half of these eyeing funds of hedge funds.

3. Big private play: a substantial 67 per cent of private sector pension funds that are planning higher allocations to hedge funds in the next 12 months are targeting funds of funds, Preqin reports.

4. North American target: half of the investors planning to make investments are focusing on fund managers based in North America.

5. European hunger: 45 per cent of investors based in Europe are planning new commitments to the hedge fund asset class, more than in any other region. In North America, it sits at 29 per cent, with 32 per cent for Asia and the rest of the world.

6. The long and short of it: 87 per cent of investors looking at hedge funds include long/short equity as their strategic preference.

7. One-man band: 83 per cent of investors expect to include an allocation to at least one single-manager fund.

8. Shiny and new: emerging managers are becoming popular. A significant 28 per cent of investors surveyed by Preqin are more willing to talk to emerging managers than they were a year ago.

9. Performance since the crisis: 60 per cent of investors say they will focus on fund managers with a track record of at least three years. This leaves out hedge funds started in the wake of the 2008 global financial crisis.

10. Size may not matter: a bit more than a third of investors will consider funds with less than $100 mn in assets under management.

Source: Preqin (PDF)

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