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Laxman Pai, Opalesque Asia: 70% of investors' hedge fund portfolios met or exceeded their target returns in 2021, said a study. Furthermore, hedge funds generated an alpha of 2.4%, which is above historical averages and marks the second consecutive year of positive alpha generation across the industry.
According to Barclays' study, 'Hedge Fund Outlook 2022', investors appear even more bullish across most hedge fund strategies than they were last year.
"Across our sample, they plan to allocate $265 million to hedge funds in 2022 on average. They plan to finance about 70% of these investments through redemptions of existing allocations. Overall, this will result in a net increase in their hedge fund exposure of about 3%," it said.
Private Banks are the most bullish with plans to allocate about $305 million and redeem only $65 million.
Such bullish sentiment bodes well for hedge funds seeking new clients. Investors said they planned to split allocations between new and existing relationships in 2022, with about 60% going to new relationships.
Barclays expects hedge funds will receive about $30-50 billion in net allocations in 2022, marking a growth of about 1% for the industry overall. "From a gross perspective, we expect investors to make allocations of $400-450 billion in 2022, which is more than the levels reached in the past couple of years," it added.
Where are the investment dollars flowing?
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