Wed, Apr 25, 2018
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Industry Updates

Credit Suisse 6th Annual Hedge Fund Investor Survey finds optimism on the topics of asset growth and performance

Tuesday, March 11, 2014
Opalesque Industry Update - Credit Suisse releases its sixth annual Hedge Fund Investor Survey, entitled “Onwards and Upwards”, in which over 500 respondents participated, representing $1.16 trillion of hedge fund investments, were analysed on a number of topics including:

• Growth and return prospects for the industry
• Strategy preference and allocations plans
• Appetite for day one Investments and new launches

Robert Leonard, Managing Director and Global Head of Capital Services at Credit Suisse commented:

“Having forecast the strong rate of growth in the hedge fund industry in 2013, institutional investors predicted hedge fund industry assets under management to grow even faster this year by an average of 12%, to reach an all-time high of $2.8T, with an upper quartile forecast of $3T. If accurate, this updated forecast would mean at least an additional $300B for the industry in 2014, coming from both performance and new capital inflows. Investors were also more optimistic about performance of the overall hedge fund industry, increasing their expectations for returns this year.

“In this year’s survey we witnessed some dramatic swings in investor preferences, such as the increase in appetite for event-driven strategies, while interest in emerging markets strategies declined. Additionally, there were also strong shifts along regional lines, as investors indicated a higher level of interest in both Europe and Japan. At the same time, investors are also cognizant of potential issues such as capacity constraints and a crowded trading environment that could affect the industry in the coming year.”

The survey, produced by Credit Suisse’s Capital Services Group, is one of the most comprehensive in the industry, with over 500 respondents—including pension funds, endowments, consultants, family offices and funds of hedge funds—and with respondents diversified across all regions.

Key highlights from the Credit Suisse annual Hedge Fund Investor Survey:

 Interest in event driven strategies reflected the greatest year-on-year increase in demand, nearly doubling from the prior year. More strikingly, none of our respondents expect to decrease their allocations to the strategy, reflecting a unanimous vote of confidence. This level of increased interest was matched in magnitude only by the drop in appetite for emerging markets, which fell precipitously.

 The notably positive momentum for Equity Long/Short continued for a second year as investors cite significant ongoing interest, pointing to an environment ripe for stock selection with decreased correlations and higher dispersions of returns.

 Despite modest returns for the past two years, Global Macro continues to remain relevant. It was forecast to be among the top three best performing strategies in 2014 and demand for Discretionary Macro stood out in particular as an area of focus for investors this year.

 When asked about the impact of fee reductions, investors cited a strong preference for management fee discounts to incentive fee discounts by a magnitude of 3:1. The inclusion of hurdle rates was also highlighted by a third of investors as their preferred fee structure incentive.

 In terms of regional preferences, Developed Europe (43%) and Japan (33%) were the clear winners, with the largest net demand from investors going into this year. North American strategies also enjoyed a positive view from investors with 15% net demand, up marginally from the 2013 survey. The view on Emerging Markets was less positive, with only 10% net demand, reflecting a notable decline from the 42% demand cited in last year’s survey.

 Additionally, Equity long/short sector funds made a strong showing in this year’s survey. In particular, both TMT and Financials appeared in the top 10 strategies ranked by net demand. Other sectors showing positive, though lesser, net demand included Consumer/Retail, Real Estate and Utilities.

 Investors continue to show strong, though selective, appetite for those new hedge funds launches deemed to be of institutional quality. Terms appear to be real game changers in this space as 40% of investors are open to investing in a new fund with a Founder’s Share class, while only 11% indicated interest in a seed investment with economic interests and a fewer 6% would be a day one investor without any economic concessions.

 Investors anticipate potential capacity constraints to develop, as some fund managers return money and/or close to new capital, while others decide to leave the business completely. Some respondents also indicated that this could be an opportunity for newer and mid-sized funds to raise additional capital this year.

 There has also been a shift in Investors’ top concerns – Regulation dropped from a top 2 concern last year to 5th this, perhaps in part because investors feel managers have incorporated many of the recent regulations into their business models.

 Taking its place this year, investors cited: Crowded trades/herd behaviour, Risk complacency and Funds chasing equity markets as being their top three concerns. Crowded trades retained its place as the top concern of investors from last year, and investors appear to be indicating that market measures of risk may not reflect true risk, having added Risk Complacency this year.

 The size of funds continues to be a factor in allocations – with the percentage that can invest capital to funds over $100mm twice those who can allocate to those under $50 mm. Therefore, $100 mm still seems like a key benchmark, at least for many investors.

Press release

Bg

What do you think?

   Use "anonymous" as my name    |   Alert me via email on new comments   |   
Today's Exclusives Today's Other Voices More Exclusives
Previous Opalesque Exclusives                                  
More Other Voices
Previous Other Voices                                               
Access Alternative Market Briefing

 



  • Top Forwarded
  • Top Tracked
  • Top Searched
  1. Investing - Sequoia takes Facebook stake as shares slide in data controversy, $1.4b hedge fund sees intact fundamentals for Facebook, Jim Cramer reveals some 'suggested hedge fund trades' amid the Trump tariffs[more]

    Sequoia takes Facebook stake as shares slide in data controversy From Bloomberg.com: The $4.2 billion Sequoia Fund bought a small position in Facebook Inc. as the stock slid late in the first quarter, investment manager Ruane, Cunniff & Goldfarb told clients. "The recent controversy enab

  2. Activist Investors - Blue Sky-owned Wild Breads faces uncertain future[more]

    From AFR.com: A Blue Sky private equity investment in artisan-style baker Wild Breads enjoyed multiple valuation upgrades despite losing millions and breaching its lending covenants, accounts lodged with the regulator last week show. Wild Breads lost $2.4 million in 2017, but Blue Sky ascribed a hig

  3. Opalesque Exclusive: Barnegat to close hedge fund to outside investors on weak opportunities[more]

    Komfie Manalo, Opalesque Asia: Bob Treue's Barnegat Fund Management said it is closing its $666m fixed income relative value hedge fund to outside investors. "The negative side to gains in Fixed Income Arbitrage is that unless we find new opportunit

  4. Investing - Hedge fund makes a big bet on malls, British hedge fund manager Odey short UK government bonds on QE bet[more]

    Hedge fund makes a big bet on malls From Barrons.com: The dominant narrative on American shopping malls is that they're dead. Crushed by Amazon.com, many brick-and-mortar retail stores are destined for bankruptcy. And where is the most retail, clustered all together? Malls. From a

  5. Performance - Hedge funds suffer first back-to-back loss in two years, Netflix performance burns hedge fund short sellers, Macro hedge fund up 14.5% in first quarter sees dollar falling, Renaissance Technologies rebounds across hedge funds in March[more]

    Hedge funds suffer first back-to-back loss in two years From Bloomberg.com: Hedge Fund returns sank for a second straight month in March, the first back-to-back loss since the first two months of 2016, as trade wars, tech-sector woes and a Fed rate hike dragged down the S&P 500 from its