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Investor satisfaction with hedge fund performance at highest recorded levels

Thursday, December 19, 2013
Opalesque Industry Update - In November 2013, Preqin interviewed 148 institutional investors with a total of more than $60bn invested in hedge funds to ascertain their outlook on the industry for 2014. These surveys form an important part of our forthcoming 2014 Preqin Global Hedge Fund Report. Early results of these interviews show that more investors stated hedge funds have exceeded their expectations than in any previous Preqin study.

Other Key Facts:

 21% of investors stated hedge fund returns in 2013 had exceeded expectations; a further 63% stated that returns expectations had been met.

 Just 16% of investors felt returns expectations had not been met, a noticeable decrease from the 41% that stated the same for 2012 in the previous year’s survey.

 Hedge funds have posted 2013 YTD returns of 10.04% as of 30 November, compared to 8.24% in the same period in 2012.

 If performance in December continues along the same lines as the rest of the year, hedge funds could be on track to post their highest net returns since 2010.

 29% of investors stated they are looking for hedge funds to produce high absolute returns.

 But consistency of returns and the ability to produce strong risk-adjusted returns were also important considerations for many investors, with 28% and 25% of investors choosing these as their objectives from their hedge fund portfolio respectively.

 The past two years have proven to be successful ones in terms of meeting these investors’ performance needs; the average net annualized returns over the past two years is 10.03% (as of November 2013) and the benchmark has been in negative territory just four times out of 23 months since the start of 2012.

Comment:

“At the start of 2013, we predicted that a need for solid performance and regulation would be key issues for hedge funds in 2013. Certainly the year has proven both of these predictions to be true, and in terms of performance it appears that many hedge fund managers have fared well this year, and investors are largely satisfied with how the industry has performed. The proportion of investors that felt that their returns expectations had not been met has fallen to its lowest level since Preqin started gathering this information, in noticeable contrast to 2012 and 2011, when dissatisfaction was at high levels among institutional investors.

As other results in our forthcoming 2014 Preqin Global Hedge Fund Report show, investors are looking for more than just the size of the returns their funds are posting; strong risk-adjusted returns as well as consistency and low volatility of performance numbers are also key attributes sought from hedge fund investments. Coupled with investors changing their outlook on their hedge fund investments and adjusting their returns expectations, we have also seen hedge funds perform consistently well over the past two years, which is also leading to increased confidence in the asset class.”

Amy Bensted – Head of Hedge Fund Products, Preqin

Press release: www.preqin.com/docs/press/Investor_Satisfaction_Dec_13

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