More than a fifth of institutional hedge fund investors, including pension funds and insurance companies, have identified ‘crowding’ in hedge fund portfolios as a top investment concern, according to a report by Reuters.
The report cites a new Bank of America survey examining end of year sentiment as revealing that their concerns — that too many hedge fund investment portfolios contain the same trades — are on the up.
Over half of the survey respondents put crowding concerns in their top three worries, a notable increase from the 2022 survey which ranked crowding in sixth place overall.
Other top concerns among those surveyed include the changing interest rates environment, risk management against losing trades and capacity constraints.
Liquidity and geopolitical risks meanwhile featured lower in the most recent ranking of concerns than the previous list.
According to the survey, long-short hedge funds, which posted a 12.5% return last year, remain the top hedge fund strategy tracked by the bank and saw the biggest interest from allocators.
Multi-strategy hedge funds meanwhile suffered a fall in investor interest, from the second most asked after strategy in 2022 to the fifth in 2023, according to the survey.
Credit hedge funds saw the biggest increase in interest, ranking as the the third most popular hedge fund type in 2023 from the sixth in 2022.
