Hedge fund boost on way from vast bulk of investors, survey finds

Some 93% of institutional hedge fund investors are considering increasing their allocation to the asset class over the next three years, suggesting a “significant” inflow of capital to come, research by Preqin suggests.

A survey by the data provider found just 7% of institutional investors already committed to the asset class had ruled out plans to increase their allocation.

The study also revealed 30% of institutional investors said they would definitely invest more capital in hedge funds over the next three years and a further 64% are considering doing so.

Meanwhile, some 32% of those currently investing in funds of funds will start investing directly and an additional 8% are considering doing so, Preqin said.

Some 40% of investors have at least one hedge fund-specific investment officer with half of these investors employ strategy-specific researchers and the other half employ generalists.

The survey also found 20% of investors had expanded their hedge fund teams over the past year, while a further 20% of those that do not currently have a hedge fund team intend to develop one within the next three years.

Some 39% of investors have increased the size of their general investment teams in the past three years, with 72% of them doing so in the past 12 months.

Preqin hedge fund data manager Amy Bensted said: “Institutional investors are certainly becoming more important to the industry, with both managers reporting more of their assets coming from institutional sources and most institutional investors planning to increase their long term allocations to the asset class.

“Indeed, a Preqin study conducted in February 2011 found that institutional capital accounted for an average 60.5% of all capital managed by a hedge fund.

“The hedge fund universe is difficult to negotiate, therefore it is no surprise that one-fifth of investors have expanded their investment teams over the past year.

“With many investors planning to increase their allocation to the asset class, as well as to move to a more direct style of investment over the next two or three years, the proportion of investors with hedge fund-specific teams is likely to grow further.”

David Walker

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