Hedge fund investors are embracing longer lock-up periods, and largely disapprove of HF investments in private equity, according to Deutsche Bank’s Fifth Annual Alternative Investment Survey. The poll of more than 1,000 representatives from 700 investor firms worldwide found that more than half of those respondents are now open to keeping their money in funds for two years or longer – more than double the percentage a year earlier. Also, 39% of those surveyed feel it’s a "bad idea" for hedge funds to make private equity investments. The worst piece of news from the survey is that 75% of investors say they have a tough time finding HF managers who can meet their investment goals. "I hear this complaint from investors more and more," John Dyment, DB’s global head of the hedge fund group, told Financial Times. "Hedge funds’ biggest challenge this year will be performance-related." While 2006 was a pretty good year, with HFs finishing around 13%, it still short of what investors hope for. "The expectation is that the funds will outperform the markets, and they haven’t been," Dyment said. "You have to look at the competition. Private equity was huge last year."
In other findings:
- Despite index reports to the contrary, long/short equity was voted the best performing strategy last year by 18% of those surveyed, followed by macro (13%) and event-driven relative value (12%).
- Merger arbitrage may see a 20% increase in assets as the result of portfolio rebalancing, while credit arbitrage will lose 13% of its assets to other strategies.
- Investment levels in China will soar 38%.
- Emerging Asia was seen as the top-performing region for the second consecutive year, with 50% institutional investors indicating they will allocate more assets to that region in 2007.
- Half of those polled are open to switching from traditional private limited partnership investments to investments in publicly trades shares sold by hedge funds.
