Institutional Investors Overwhelmingly Plan Hedge Allocations

Jul 18 2014 | 11:42am ET

Hedge funds could be in line for a windfall of new institutional capital in the second half, according to a Credit Suisse survey.

The bank’s mid-year Hedge Fund Investor Sentiment Survey shows that 97% of institutional investors plan to be highly active in making allocations during the second half. Credit Suisse’s Annual Global Investor survey earlier this year showed only 85% expecting such activity in the first half.

“The high percentage of respondents with strategic intention to actively allocate to hedge funds in the second half of this year could reflect a prolonged due-diligence process, in response to high levels of market volatility back in March/April,” Robert Leonard, global head of capital services, said. “Regardless, it does seem clear that institutional investors remain committed to hedge funds, as many see current equity and bond market valuations as high and are looking to further diversify their portfolios.”

Institutional investors are particularly hungry for event-driven funds, with 56% identifying the strategy as a high priority. Equity long/short funds, especially those with a fundamental bent, are favored by 41% of respondents. Emerging market equities have seen a rebound in interest, with 20% naming it as a focus, while commodities strategies have gone from negative interest to a slight positive. Global macro continues to decline in investor eyes, with just 17% admitting to an appetite for the strategy.

Investors still plan to redeem from commodity trading advisors and managed futures funds.

Credit Suisse said that 284 global institution investors, with some $544 billion in hedge fund investments, responded to the poll.

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