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Alternative Market Briefing

Most hedge fund investors to maintain or increase hedge fund allocations despite crowding concerns

Monday, April 01, 2019

Laxman Pai, Opalesque Asia:

Despite a turbulent 2018 marked by poor performance and market volatility, Institutional investors are swarming to hedge funds this year.

According to J.P. Morgan Capital Advisory Group's 16th annual Institutional Investor survey, investors plan to continue to utilize hedge funds as a primary source of alpha generation in 2019 and to increase their overall asset allocation to hedge funds.

68% of survey respondents indicated their hedge fund portfolio underperformed its target return in spite of poor performance across the hedge fund industry, a stark contrast with 2017.

As a potential result, 80% of respondents indicated crowding as a top concern when investing in hedge funds, up from 62% last year. Yet, looking to 2019, most hedge fund investors expect to maintain - or even increase - their overall hedge fund allocation.

32% of respondents' hedge fund investments met or exceeded expected returns in 2018, in stark contrast to 2017.

Investors outside of banking/platforms and consultants consolidated their hedge fund portfolios in 2018, with nearly 40% reducing their number of allocations. Looking forward into 2019, 42% of respondents indicate they expect to increase the number of hedge fund investments they make.

Investors plan to increase their hedge fund exposure in 2019

Most investors plan to maintain or increase their hedge fund exposure in 2019. Capital invested in hedge funds will likely be reallocate......................

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