Survey: Institutions To Increase Hedge Fund Allocations

May 20 2011 | 11:37am ET

Institutional investors that have tried hedge funds apparently like them—the latest Preqin survey of 70 such investors shows 30% will definitely increase their allocations to hedge funds over the next three years while 60% are considering doing so.

The research firm says this suggests there will be a significant inflow of institutional capital into the hedge fund industry in the next few years.

The study also found that 20% of investors had expanded their hedge fund teams over the past year while 20% of those who currently have no such team intend to develop one within the next three years.

Other highlights of the latest Preqin report include the finding 32% of those currently investing in funds of funds will start investing directly and an additional 8% are considering doing so. 

“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,” said Amy Bensted of Preqin.

“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.”

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