According to Preqin’s latest survey of alternative assets investors, 45 per cent of institutional investors allocate to hedge funds, with the majority of investors reporting satisfaction with the performance of the asset class.
In June 2018, two- thirds of investors found that hedge fund performance had met or exceeded expectations over the past 12 months, including 16 per cent which found that performance had exceeded expectations. This marks a significant switch in sentiment from June 2016, when 79 per cent of investors felt that hedge fund performance had fallen short of expectations.
Looking ahead, almost a third (32 per cent) of investors believe their hedge fund portfolio will perform better in the next 12 months compared to the previous year, and over half (51 per cent) expect returns to be about the same. In fact, over two-thirds (69 per cent) of investors planning to allocate to the asset class expect to make their next hedge fund investment in H2 2018, while 16 per cent are looking to invest in 2019.
The majority (63 per cent) of investors view North America as presenting the best opportunities in the year ahead, while a notable 28 per cent are looking to Asia.
Currently, 45 per cent of investors allocate to hedge funds, with investors allocating an average of 15 per cent of total assets to the asset class.
Amy Bensted (pictured), Head of Hedge Funds, says: “Investor satisfaction with the performance of their hedge fund investments points to the fact that, even though the industry has not seen exceptionally strong performance this year, over the longer term hedge funds have been able to generate positive returns.”
“However, investors are concerned that equity markets could be approaching a peak, and with the instability of the political and macroeconomic climate it has been difficult to generate consistent momentum. Investors perceive several benefits of hedge funds, citing diversification, low correlation to other asset classes and high-risk adjusted returns as key reasons to invest in the asset class. It is perhaps due to the current volatility in the market that that four out of five investors expect hedge fund performance to maintain or improve in the coming year.”