Institutional Disappointment With HF Returns Up In 2012

Feb 12 2013 | 9:04am ET

Many institutional investors were not overly thrilled with the return on their hedge fund investments in 2012, according to new research from Preqin.

The research firm found that 41% of the 85 institutional investors surveyed reported their hedge fund returns had failed to meet expectations last year. That means disappointment with performance is at its highest level since the research firm began collecting this data in 2008.

Only 3% of those polled said the return on their hedge fund investments had exceeded expectations, down from 11% in 2011.

On the bright side, 57% of the institutional investors polled felt their hedge fund investments had met expectations, and that's up from 49% in 2011 and 53% in 2010.

Disappointment in 2012 hedge fund returns translates into the first place ranking of performance as a priority in 2013. Other key issues cited by investors include regulation (24% of respondents) and fees and transparency (23%).

Asked about the increasing regulation of hedge funds, 49% of institutional investors expected this to have a positive change, 33% expected a negative change and 18% expected no change. Investors felt that regulations could be positive due to increased transparency and oversight, although some investors believe regulations may drive up costs and make it more difficult for smaller, more nimble hedge fund managers.

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