The latest Preqin hedge fund investor study has revealed that just under one-third of investors plan to make a commitment to the asset class in the coming 12 months, investing up to a combined USD195bn. Of these investors, 47% are seeking opportunities to invest in funds of hedge funds. The research also found that over half of funds of hedge funds are seeking new investments themselves.
Some 36% of public pension funds are looking to make extra allocations to the asset class in the next 12 months. Of these, over half are looking to make fund of funds commitments.
A total of 67% of private sector pension funds that are planning to increase allocations to hedge funds in the next year are looking for opportunities to invest in funds of hedge funds.
Some 50% of those with investment plans are looking to commit to North America-based managers.
Europe-based investors have the greatest appetite for new commitments; 45% are seeking new opportunities, compared to 29% of North American, and 32% of Asia and Rest of World-based investors.
A total of 87% of those planning to invest include long/short equity as a strategic preference, and 58% are taking an opportunistic approach, while 83% of investors anticipate including an allocation to one or more single-manager funds.
Some 19% are looking to establish a managed account arrangement, while emerging managers have grown in popularity, with 28% of all investors stating that they are more open to marketing from emerging managers than they were one year ago.
A total of 60% of investors will focus on managers with a track record of at least three years, while just over one-third will consider vehicles with less than USD100 million in assets under management.
“With nearly a third of the investors on the Preqin database having fixed plans for new investments in the next 12 months, and many others investing opportunistically or considering new allocations, the future is looking bright for the industry," says Katherine Johnson, Report Author. "Investors could invest up to USD195 billion in the next 12 months, with up to 2,000 funds currently being sought. Funds of hedge funds, pension funds, insurance companies and a large number of other investor groups are looking to increase their hedge fund portfolios in the next year. These investors are seeking a wide range of strategies and structures and therefore it is vital that managers have the best intelligence on these investors if they are to gain a slice of this capital.”