Highlights from a recent hedge fund industry report:
- 65% of hedge fund industry capital comes from institutional investors.
- 4,600 institutional investors allocate capital to hedge funds.
- Regional breakdown of allocators are as follows: 54% USA, 27% Europe, 7% Asia, 5% Middle East, 4% Canada, 3% ROW.
- 87% of investors are maintaining or increasing their allocations to hedge funds in the next 12 months.
- When asked what they’re looking for from hedge funds, 59% are seeking uncorrelated returns, 56% are seeking risk-adjusted returns, 46% seek reduced portfolio volatility, 7% are seeking high returns.
- 84% of institutional investors feel return expectations have been met or exceeded in the past 12 months.
- 80% of institutional investors believe portfolio risk would increase if they ceased investing in hedge funds.
- When bench-marking performance, investors believe traditional benchmarks such as the S&P 500 are irrelevant, preferring to use strategy-specific hedge fund indices to measure performance.
- Mean allocation to hedge funds by investor type: Endowment = 19%, Family Office = 20.3%, Foundation = 17.6%, Insurance Company = 2.3%, Private Sector Pension = 10.5%, Public Sector Pension = 7.7%, Sovereign Wealth = 7.0%.
- Largest impediment to investing in hedge funds: difficult to source good funds was cited by 23% of institutional investors.
- 67% of investors seek annualized returns of between 4% and 6%.
- 3% seek returns of 10%, another 3% seek returns in excess of 10%.
- 4% of investors plan to reduce their hedge fund exposure in the next 12 months whereas 19% believe they’ll increase and 68% suggested no change.
- In Q3-2014, 179 new hedge funds launched, up 11% versus Q2-2014.
(Source: Prequin)
