High Net-Worths, Family Offices Increase Hedge Fund Investments

Mar 22 2013 | 11:19am ET

The inexorable march of pension funds into hedge funds has slowed, as the industry's earliest backers returned to the fore during a difficult period.

Family offices and high net-worth investors account for 54% of hedge funds' investor base, according to an Infovest21 survey. Pensions make up just 8% of that base.

Family offices actually increased their share of hedge fund investments compared with 2010, Infovest said. Foundations, which make up 3% of the industry's investor base, also increased their share.

By contrast, all other types of investors saw their share fall. Funds of funds now account for 13% of the investor base, financial institutions 11% and sovereign wealth funds for 3%.

As the industry returns to form and the economy begins to grow, those investors are expected to add to their hedge fund investments. Infovest President Lois Peltz said that high net-worth investors and family offices will see their share drop to 49%, while private funds will rise to 15%, pensions to 9% and foundations to 4% over the next year. Financial institutions are expected to hold at about 11%, while SWF fall back to just 1.7%.

The Infovest Manager Snapshot Survey also shows that the average hedge fund has 110 investors, that 90% posted performance gains last year, and that fees are falling. The average management fee was 1.5% and the average performance fee 18.2%; 19% of hedge funds lowered the former last year and 10% the latter.

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