Sat, Mar 28, 2015
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. Other Voices: Does the hedge fund industry benefit society?[more]

    This article was authored by Don Steinbrugge, Chairman of Agecroft Partners, a US-based global consulting and third party marketing firm for hedge funds. It is no secret that the hedge fund industry is viewed negatively by a la

  2. Private credit comes into focus for investors[more]

    Bailey McCann, Opalesque New York: As investors look for a way out of the low yield/no yield environment, private credit is becoming an increasingly attractive asset class, according to a white paper from Bayshore Capital Advisors. Private credit has grown steadily since the financial crisis as

  3. M&A - Hedge funds no longer attractive targets for banks, reinsurers, Blackstone buys stake in Christopher Pucillo’s Solus event-driven hedge fund[more]

    Hedge funds no longer attractive targets for banks, reinsurers From Institutionalinvestor.com: Swiss RE, the world’s second-largest reinsurer, is looking to sell its 15 percent stake in Jersey, Channel Islands–based hedge fund firm Brevan Howard Asset Management. Morgan Stanley reported

  4. Opalesque Radio: Threadneedle expects continuing equity volatility this year[more]

    Benedicte Gravrand, Opalesque Geneva: Investors should expect more volatility, which is signaling a "slow moving" top to the market, KKM Financial’s founder and CEO Jeff Kilburg told CNBC on Monday. And this volatility is going

  5. Hedge funds show strong performance of 2.52% so far in 2015[more]

    Komfie Manalo, Opalesque Asia: The hedge fund industry got off to a strong start in 2015 "completely unmindful" of the poor performance last year, according to data provider Preqin. According to Preqin, following a year which saw the average he

 

banner