Investors See Hedge Fund Growth, Settle For Lower Returns

Feb 25 2013 | 11:54am ET

Alternative investment assets will return to their all-time high this year, according to an investor survey.

The 11th Deutsche Bank Alternative Investor Survey shows that those investors expect industry assets to take in $123 billion in new capital and reach a record $2.5 trillion by the end of the year. The buoyant hopes come as investors' expectations of hedge funds have hit lower, but perhaps more manageable levels.

According to the survey, investors now expect just steady, predictable returns from hedge funds, rather than consistent outperformance. For this year, 65% of investors hope for returns of just 5% to 10%. And two-thirds of respondents said hedge funds had done as well as they expected or better last year, when the average hedge fund returned between 5% and 10%.

"The hedge fund industry is experiencing an ongoing evolution as investor expectations and manager returns more closely align," Deutsche Bank prime finance co-head Barry Bausano said. "Our 2012 survey closely predicted hedge fund asset growth for the year. In 2013 investors predict increased growth of 11%, with assets reaching $2.5 trillion by year-end."

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