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Hedge funds report resurgence in inflows from sources of private wealth

Thursday, February 27, 2014
Opalesque Industry Update - 50% and 34% of hedge fund managers reported a growth in capital coming from family offices and wealth managers respectively in 2013. Preqin’s global survey of over 100 hedge fund managers at the end of 2013 showed that managers also saw inflows from institutional sources; 41% reported an increase in assets coming from institutional coffers. The combined effect of strong performance, institutional inflows and the return of private wealth capital has led to the industry topping $2.6tn in assets, growing by more than $300bn in 2013.

Other Key Facts:

 An increase in the proportion of capital coming from family offices was witnessed by hedge fund managers in all regions; 55% of Europe-based managers and 51% of North America-based managers saw an increase, while 36% of Asia-Pacific-based managers did so.

 Preqin’s Hedge Fund Investor Profiles* database shows that the mean current allocation to hedge funds among family offices increased from 16.6% of total assets in December 2012 to 19.5% in December 2013.

 Overall in 2013, there was a net increase in the proportion of assets coming from institutional investors with 41% of fund managers reporting an increase, while only 7% noted a decrease.

 All major institutional investor types increased their mean current allocation to hedge funds between December 2012 and December 2013.

 Hedge fund managers are confident about the prospects of the industry; 73% have a positive outlook for the industry in the year ahead, and 83% expect total industry assets to increase in 2014.

 Managers expect building on the encouraging performance in 2013 to be a key issue in the year ahead, with 68% of managers stating that generating strong performance is a key challenge in 2014.

 Regulation is the one black cloud on the horizon, with 50% of fund managers believing that it will have a negative impact on the industry.

For more information and analysis, please see www.preqin.com/docs/newsletters/HF/Preqin_Hedge_Fund_Spotlight_February_2014.pdf

Amy Bensted, Head of Hedge Funds Products, commented: “As institutional investors continue to increase their allocation to hedge funds, the proportion of total industry capital coming from institutional investors now tops 65%. However, family offices, wealth managers and other sources of private wealth have shown renewed enthusiasm for hedge funds and have been increasing the amount of capital they invest in the asset class over the past year. This, coupled with the double digit net returns of 2013, led to the industry growing by more than $300bn in 2013.

The confidence investors showed in hedge funds in 2013 through increased allocations looks set to continue in 2014; hedge fund managers are also positive in their outlook for the year ahead, with 83% expecting industry assets to grow further in 2014. The hedge fund industry is currently undergoing rapid evolution with a proliferation of new types of funds and strategies, such as liquid alternatives, customized funds, and the growth of managed accounts. The broadening of choices for investors is making the industry more attractive for all types of investor, from small family offices seeking higher returns and access to niche strategies through to the largest institutional investors seeking less volatile, transparent, customized products. Therefore we could see further growth in 2014 as the increasing choice for investors leads to more inflows.”

Press release

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