In spite of its second-worst year in terms of performance in 2011, the hedge fund industry could enjoy its best year in five in terms of inflows in 2012.
More than half of investors plan to boost their hedge fund investments this year, according to a Barclays survey. Less than 10% plan to cut them, meaning that hedge funds could take in about $80 billion in new capital over the next 12 months.
This year "has the potential to be the most significant year for new capital allocations to hedge funds since 2007," Ajay Nagpal, head of prime services at Barclays, said. Smaller funds, in particular, are likely to benefit in a year that could see $300 billion in reallocations in addition to the $80 billion in new money.