Investors predict inflows of USD222bn into hedge funds this year, which would increase the total amount of hedge fund assets under management to approximately USD1.722trn by 2011, according to Deutsche Bank’s eighth annual Alternative Investment Survey.
Half (52 per cent) of investors predict equity long/short to be one of the best performing strategies for 2010, and 51 per cent believe they will increase their allocations to the strategy.
Survey participants are looking to reduce their cash levels over the next six months by USD3.09bn, and 29 per cent have ten per cent or upwards of cash available to allocate to hedge funds.
While the hedge fund industry has proven resilient, investors have not forgiven management’s behaviour during the crisis: 80 per cent of investors will not make a new allocation to a manager who has frozen or suspended assets in the past.
There is a continued appetite amongst investors for managed accounts: 14 per cent currently use managed accounts and 26 per cent of investors are likely to in the immediate future.
Investors remain reluctant to allocate to small start-up funds, with 50 per cent requiring the start-up to have at least AUM USD100m before investing.
“The hedge fund industry weathered the global financial crisis and matured as a result,” says Jonathan Hitchon, co-head of global prime finance. “Risk management remains a top consideration for investors when assessing a hedge fund manager, and investors are increasingly using consultants to perform specialist operational due diligence.”
