By Sam Jones, Hedge Fund Correspondent
Published: August 10 2010 16:28 | Last updated: August 10 2010 16:28
Nearly a third of institutional investors plan to increase the amount of money they invest with hedge funds over the next 12 months, according to a new survey, in spite of one of the industry’s worst quarters ever.
Just 15 per cent of investors surveyed said they were looking to decrease their portfolio allocations to the $2,000bn industry, said the report, conducted by the alternative investment consultancy Preqin.
The findings come as a significant fillip for hedge funds, which have seen inflows dwindle in recent months on the back of huge performance-related losses in May and June.
The industry lost $30bn of investors’ money in the second quarter, according to data from Hedge Fund Research. After nearly $14bn of net inflows into funds in the first three months of the year, investment in hedge funds dropped to just over $9bn in the three months to the end of June.
Institutional investors surveyed by Preqin in July were not deterred, however.
Over two-thirds of those surveyed said hedge funds within their portfolios have met or exceeded their return expectations.
To boot, institutional investors – regarded by many hedge fund managers as the ideal client thanks to their longer investment time horizons and large investment mandates – said they were now actively seeking to develop relationships with new managers, rather than merely increasing allocations in existing mandates.
A quarter of respondents also said that their existing portfolio allocation targets to hedge funds had yet to be met.
Hedge fund managers have been banking on significant institutional inflows for some time. So far, however, money flows have been lacklustre.
Although the industry’s total assets under management have bounced significantly from their nadir of $1,500bn in 2008, most of the growth has come from the large performance-driven gains seen in 2009 – a year when the average fund manager returned approximately 19 per cent.
“Flows are pretty anaemic,” according to Kelly Perkins, the co-chief investment officer of the $4.5bn US fund of hedge funds business Lighthouse Investment Partners. “Institutional investors are longer term investors though, so flows require a longer lead time. There are a lot of strategic discussions going on right now rather than 90-day discussions,” he said.
According to Preqin, the results of the survey point to modest flows into the industry for the rest of 2010, with a “more significant” increase in commitments from institutional investors coming through next year.
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From FT.COM published on August 10 2010 16:28
