Institutional investors intend to remain active in hedge funds, with 88 per cent indicating that they plan to make additional allocations during the second half of this year, according to Credit Suisse’s mid-year Hedge Fund Investor Survey.
This indicates that the industry may see continued significant levels of allocation activity in the second half of 2013.
In addition, respondents were asked to share their insights into whether they are planning to allocate, maintain or decrease allocations to various hedge fund strategies in the second half of this year. The top three strategies by net demand (percentage increasing allocation - percentage decreasing allocation) were:
· All respondents: long/short equity- fundamental (57 per cent), event driven (47 per cent) and global macro (39 per cent)
· Americas: long/short equity- fundamental (58 per cent), event driven (48 per cent) and global macro (22 per cent)
· Asia: long/short equity- trading (50 per cent), long/short equity- fundamental (40 per cent) and global macro (40 per cent)
· EMEA: long/short equity- fundamental (57 per cent), global macro (52 per cent) and event driven (47 per cent)
By comparison, in the annual CS global investor survey at the start of the year, the top three strategies were long/short equity, emerging markets equity and event driven.
When evaluated on a gross basis (straight percentage increasing allocation), respondents believed that long/short equity- fundamental strategies are likely to see the most gross allocation activity in the second half of this year, with 61 per cent of global investors surveyed indicating that they plan to allocate, followed by event driven, with 51 per cent planning to allocate. Conversely, investors indicated that commodities funds are likely to see the most redemption activity over the next six months, with 32 per cent indicating that they plan to lower their allocation to the strategy, followed by emerging markets credit, with 29 per cent planning to reduce their allocation.
"From this mid-year survey, it is clear that investors remain focused on long/short equity and event-driven strategies, particularly those involving fundamental approaches," says Robert Leonard, managing director and global head of capital services at Credit Suisse. "We believe that some of this activity is being driven by the gradual rotation of capital from fixed-income markets into equities. Investors are also reacting to improving global markets and lower correlations by seeking those funds that can differentiate by their stock-picking abilities. Based upon these responses, we would expect continued strong inflows to the industry during the second half of this year, as additional capital continues to come off the sidelines and into hedge funds."