The hedge fund industry will reach an all-time high of $2.25 trillion the end of 2011, according to the ninth annual Deutsche Bank Alternative Investment Survey.
The survey says hedge fund investors continue to believe in the benefits of hedge fund investment and that, provided the industry is not affected by events generating negative publicity and “headline risk” (to which institutional investors, the authors say, are particularly sensitive).
Inflows are expected to quadruple year on year to $210 billion in 2011, which represents industry growth of over 10% of its current size.
The DB survey also found that more cash will be put to work as investors reduce their cash position over the next six months by $29 billion. By June 2011, 75% of investors will hold less than 5% cash.
Over 70% of pensions and more than half of all consultants are increasing their dedicated hedge fund teams, says the survey. Over 50% of all investors increased their hedge fund AUM during 2010.
In addition, the report says consultants are increasing the number of clients to whom they provide advice on hedge funds and that 82% of consultants are seeing their clients increasing the proportion of their portfolios in hedge funds in 2011.
The 2011 Deutsche Bank survey involved 520 hedge fund investors with total AUM of over $1.304 trillion. A more detailed overview can be found here.