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Preqin: Investors struggle to source attractive hedge funds

First Published 29th September 2017

42% of investors found it harder to find appealing funds in 2016 than in 2015

Preqin's surveys of hedge fund investors find that many report increasing difficulty in finding attractive funds in which to invest.

Almost half of investors said in June that they were planning to reduce their allocations to hedge funds over the next 12 months. Of these,, 38% said that three-year performance was the driving factor behind the decision, while a further 16% said their outlook on future performance was negative. When looking to make new fund commitments, investors are faced with a wide dispersion of returns within and between different leading hedge fund strategies. With almost 15,000 hedge funds currently open to investment worldwide, this poses a significant challenge to investors seeking to expand or modify their hedge fund portfolios.

Key Hedge Fund Investor Facts:

  • Forty nine percent of investors plan to reduce their exposure to hedge funds over the next 12 months.
  • Of these, 38%% cite three-year performance as the leading reason for reducing exposure, while 1 6% cite a negative outlook on performance.
  • Forty-eight percent of investors report that fewer than half of their portfolio hedge funds have met expectations over the past 12 months.
  • When selecting new funds, 76%% of investors look for a successful team performance track record, while 54% seek proven experience and 51% desire successful firm - level performance..
  • However, performance can differ between and within leading strategies: interquartile ranges for annualised three-year returns vary from 5.12% for relative value funds to 7.73% for macro strategies funds.
  • As such, investors are more satisfied with some strategies than others. Sevent -six percent feel event driven strategy hedge funds have met expectations in H1 2017, compared to just 48% that say the same of macro strategies funds.
  • Investors'' allocation plans vary accordingly. While a third of investors are looking to increase their allocations to relative value hedge funds , and none are looking to reduce exposure,, almost equal proportions are looking to increase (115%) and decrease (12%%) exposure to multi-strategy funds.
  • There has been significant growth in the number of active hedge funds in recent years, up from 12,500 in 2012, to 14,779 in June 2017.
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