Investors Predict $250 Billion Growth For Hedge Funds

Feb 24 2012 | 8:42am ET

For the second year in a row, hedge fund investors expect the industry's assets under management to reach record levels.

Respondents to Deutsche Bank's annual survey said that global hedge fund assets may rise to $2.26 trillion this year, a 12% increase from last year. The investors expect up to $250 billion in new assets; with net inflows of as much as $140 million and the rest coming from investment returns.

Expectations for 2012 nearly match those for last year, when the survey showed investors expected global hedge fund assets to hit $2.25 trillion. In the event, they only reached $2.01 trillion.

The survey also shows that hedge fund investors—respondents to the poll number 392 investors with $1.35 trillion in hedge fund assets—expect hedge funds to continue to underperform the Standard & Poor's 500 Index, with returns of about 6% compared to an expected 6.4% for the S&P500.

"Performance is key in a low-yield environment," Anita Nemes, global head of capital introduction at Deutsche Bank, said. "Institutional investors recognize the potential for strong hedge fund returns in 2012."

The surveyed investors said they expect to continue to reduce their cash allocation, freeing up as much as $39 billion for hedge funds over the next six months. One-third of the respondents said they increased their hedge fund allocations last year.

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