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Alternative Market Briefing

Institutional investors plan to continue to utilize hedge funds

Wednesday, October 23, 2019

Laxman Pai, Opalesque Asia:

While sentiment toward hedge funds has become increasingly critical after a turbulent 2018, 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 - according to a survey.

After increased market volatility throughout 2018 contributed to poor performance across the hedge fund industry, 68% of the J.P. Morgan Capital Advisory Group's 16th annual Institutional Investor survey respondents indicated their hedge fund portfolio underperformed its target return, 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.

The survey noted that 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.

Most investors plan to maintain or increase their hedge fund exposure in 2019. Capital invested in hedge funds will likely be reallocated across different strategies and managers, particularly away from long-biased equity strategies and into volatility, macro/relative value and credit strategi......................

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