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Alternative Market Briefing

80% of institutional investors plan to maintain or increase allocation to hedge funds

Monday, February 25, 2019

Laxman Pai, Opalesque Asia:

Despite the majority (55%) of surveyed institutional investors reporting disappointment with the 2018 return of hedge funds, the defensive properties a hedged portfolio can offer in 2019 are leading to signs that investors are weighting back into hedge funds, said Preqin.

According to Prequin report 'Alternatives in2019', the largest proportion (80%) of surveyed investors plan to maintain or increase their exposure to hedge funds in the next 12 months.

This figure is higher than in each of the previous three years, it said.

In addition, for the first time in four years, a greater proportion of investors looking to increase their exposure (29%) over the longer term than decrease their exposure (12%).

With investors indicating they are positioning more defensively in 2019, those funds with a large long exposure to equity markets may see outflows, as investors look to strategies less correlated to market beta - macro strategies, CTAs and relative value strategies for instance.

"Not even the largest funds will be safe from investor withdrawals: we expect investors to continue to evaluate all managers in light of their performance, costs and ability to navigate difficult markets, regardless of size, in 2019," said the report.

Positive outlook in difficult times

Despite industry assets falling in the second half of 2018, as a result of the combination of investor withdrawals and performance losses in Q4......................

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