Preqin Survey: Hedge Fund Managers Remain Cautious on Sentiment Concerns

Aug 24 2017 | 9:49pm ET

A new survey of hedge fund managers shows the majority is cautious about the second half of 2017, according to data provider Preqin, despite improved performance and positive net asset flows.

Despite $25 billion in net capital inflows during the first half (following $110 billion in net outflows during 2016) and the best aggregate 1H performance since the first six months of 2009, Preqin’s survey shows hedge fund managers are girding for flat or negative flows during the back half of the year amid persistently negative investor sentiment. 

Preqin surveyed 140 hedge fund managers during June 2017 for their thoughts about the industry’s direction over the remainder of the year. Although two-thirds say they have met or exceeded their return objectives over the preceding 12 months, some 69% of respondents predicted net asset flows would be flat or negative in the second half of the year, and more than a third believe that investor sentiment is more negative now than it was 12 months ago. 

Other highlights from Preqin’s second half 2017 Hedge Fund Manager Outlook: 

  • 60% of managers report that their assets have increased in the past 12 months, while only 15% reported seeing a decrease. 

  • The market rally following President Trump’s election at the end of November 2016 is seen as having the largest impact on performance; 79% of managers reported that this had affected their performance in 2017 and 80% of those reported that this had affected their performance positively. 

  • 30% of hedge fund managers report that fundraising has become more difficult over the past 12 months. This is an improvement from 47% that said the same in 2016. 

  • 45% of fund managers report that investor demand for more favorable fees is the key driver of change in the hedge fund industry. 

  • 36% of respondents report that investors have become more negative towards hedge funds over the past year, while only 24% believe that investors feel more positive. 

“Following net outflows from the hedge fund industry of more than $100bn in 2016, the first half of 2017 has seen two consecutive quarters of capital inflows,” said Amy Bensted, head of hedge fund products for Preqin, in a statement. “This may indicate investor sentiment toward the asset class is becoming more positive, perhaps in response to the improved performance environment over the past 12 months. 

“However, fund managers do not seem to believe that this will benefit them in the longer term, and their judgment of investor sentiment is negative overall,” she added. “It is particularly notable that over a third of managers gauge that investor sentiment is worse than in June 2016 – a historic low-point for hedge fund investor confidence." 

Founded in 2003, Preqin is a leading source of information for the alternative assets industry, providing data and analysis via online databases, publications and bespoke data requests. The company's Hedge Fund Online service is a leading source of intelligence on the hedge fund industry, with performance information for over 16,000 hedge funds across strategies and geographies. More than 47,000 professionals in 90 nations use the company’s products. 

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