Hedge funds are likely to see at least USD50bn of new allocations before the end of 2009 as investors begin re-deploying the cash balances built up defensively during the recent market
Hedge funds are likely to see at least USD50bn of new allocations before the end of 2009 as investors begin re-deploying the cash balances built up defensively during the recent market dislocation, according to research by Barclays Capital.
Investors surveyed for the research, called Picking up the Pieces, reported holding an average of 14 per cent of their portfolios in cash, which nearly 80 per cent plan to reallocate during 2009.
Pensions, traditionally limited in their hedge fund allocations, are expected to increase the weight of hedge fund exposure in their portfolios, alongside family offices. Insurance companies, private banks, endowments and foundations are all likely to decrease their allocations to hedge funds.
Brian Reilly, managing director, says: ‘In producing Picking up the Pieces, we found that in spite of dramatic changes in the investor landscape, certain investors were ready to deploy their cash balances aggressively once markets stabilized. Managers who develop early relationships with new investors will be the primary beneficiaries of this trend.’
Investors expressed a sharp trend away from highly leverage and high beta strategies into simpler, more liquid strategies and those which focus on opportunities in dislocated markets, notably distressed and directional credit.
The report also found that total investable assets contracted by approximately 20 per cent in 2008, while hedge fund assets declined by 25 per cent decline over the same period.
The total size of global investable assets shrank in 2008 to approximately USD60trn, down some 20 per cent from USD75trn at the end of 2007
The top three hedge fund investor segments are American pensions with USD 306bn in investable assets, American private banks with USD216bn, and European private banks with USD177bn.
Global hedge fund assets under management are expected to level off at USD1.3trn by the end of 2009, after bottoming out at USD1.2trn at mid-year.
