Study: Hedge Fund Investors To Invest More, Shop Around In 2012

Nov 11 2011 | 8:53am ET

Hedge fund managers can expect “a large influx of capital” from institutional sources over the next 12 months, says industry data provider Preqin, and assets could reach the pre-crisis watermark of $2.6 million trillion.

Preqin’s predictions are based on a recent poll of 64 hedge fund investors which revealed that 80% are considering investing with new managers over the next 12 months.

Only 20% of the investors polled plan to focus solely on relationships with existing managers.

Moreover, 38% of investors plan to increase their allocations to hedge funds over the next year, while only 9% intend to cut back.

The poll, conducted for the 2012 Preqin Hedge Fund Investor Review, found that 10% of investors plan to invest only with new managers in the next year, while 49% intend to seek new relationships while maintaining those they already have. An additional 21% are looking at new proposals opportunistically.

Preqin says 40% of the investors polled were unhappy with the returns produced by their hedge fund investments in 2011. The poll found that 20% of investors had more confidence in hedge funds now than they did in 2010, while 66% said they felt the same level of confidence.

In terms of hedge fund strategies, the most popular was long/short equity, which 38% of investors said they were seeking. The next most popular strategy—sought by 26% of investors polled—is global macro.

The majority (79%) of investors intend to invest directly in hedge funds, says Preqin, while only 24% plan to invest in funds of funds (down from 42% a year ago). Managed accounts are the investment of choice for 15% of the institutions polled.

Firm track record is the most important criterion for an investor when choosing a fund manager, followed by fund performance and strategy.

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