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Preqin survey - Institutional investors favor direct investments over FoHFs

Thursday, July 15, 2010
Opalesque Industry Updates - A Preqin survey of 50 institutional investors in hedge funds reveals that investors are re-evaluating their fund of hedge funds investment strategies and seeking to commit to single manager funds. 64% of respondents made their first hedge fund investment through a fund of hedge funds, but just 36% of these investors continue to pursue investments in such funds.

Investors surveyed included public and private sector pension funds, asset managers, insurance companies, banks, foundations, family offices and endowments. Respondents were from all regions. They were asked about their current hedge fund portfolios, investment strategies and interest in both funds of funds and direct investment in hedge funds.

Key Findings include:

  • 80% of respondents that have moved away from funds of hedge funds did so in 2008 or after.
  • 64% of respondents entered the asset class through fund of funds investments, but only 36% of these continue to invest solely through funds of hedge funds.
  • 36% of respondents that currently invest solely in funds of hedge funds plan to move towards direct hedge funds in the future.
  • 60% of respondents cited the extra layer of fees as the main reason they moved away from funds of hedge funds.
  • Greater control over their investments (54%) and more in-house resources (13%) were other reasons cited for the move into direct investment.
  • Public pension funds still invest heavily in funds of funds, with two thirds of public pension funds only investing through funds of hedge funds.
  • Endowments and insurance companies are the largest investors in direct funds, with 66% and 50% respectively only investing in hedge funds directly.

Corporate website: www.preqin.com

- FG

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