Hedge funds to see strong capital allocations in H2 2014, says Credit Suisse survey
The second half of 2014 looks set to be a strong period for capital allocations to hedge funds, according to a poll of institutional investors conducted by Credit Suisse Capital Services.
Of the investors surveyed, 97 per cent indicated that they plan to be highly active in making allocations during the second half of this year.
This compares favourably to 85 per cent of investors who responded that they had already been active in making allocations in the first half of the year.
Robert Leonard, managing director and global head of capital services at Credit Suisse, says: “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. 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.”
The top three strategies by net demand on a regional basis were:
• Americas: event driven (51 per cent), long/short equity - fundamental (46 per cent) and emerging markets equity (28 per cent)
• APAC: event driven (64 per cent), long/short equity - fundamental (56 per cent) and equity markey neutral – fundamental (44 per cent)
• EMEA: event driven (63 per cent), long/short equity - fundamental (29 per cent) and global macro (24 per cent)
Event-driven (56 per cent) and equity long/short (41 per cent) strategies (particularly those with a fundamental approach), continue to dominate investor appetite. This is consistent with the CS Annual Global Hedge Fund Investor Survey published in March, when investors also ranked those strategies at the top of their lists. It also underlines the ongoing rotation of capital by investors from fixed-income into equities.
Emerging market equities (20 per cent), has seen a rebound in appetite for the second half of 2014, as this becomes the fourth most in demand strategy for those investors polled, ascending from its 11th place ranking at the start of the year. The strategy is particularly favoured by those investors based in the Americas.
Overall investor demand for global macro strategies (17 per cent) continues to decline. Investor appetite has consistently decreased over the past year; after being among the top three most sought after strategies at the beginning of 2013, the strategy dropped to 4th at the beginning of this year, and is now ranked 6th overall. However, there was some interest amongst EMEA-based investors, who ranked it 3rd in terms of their strategy preferences.
Investors remain bearish on CTA/managed futures, forecasting possible redemptions in H2 2014, with a negative net demand of 17 per cent globally. Interest in commodities focused strategies, which were negative at the beginning of the year, have now actually turned slightly positive.
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