IIs To Add $90B In HF Coffers

Date: Friday, October 26, 2007
Author: Hedge Fund Daily

Institutional investors are expected to pump another $80-90 billion into the hedge fund industry over the next 12 months, according to Private Equity Intelligence. Preqin bases its prediction on current average II allocations of 12.5%, with a long-term target allocation of 15% and that 40% of all HF commitments are coming from institutional investors. The survey found that 35% of those IIs polled have been investing in hedge funds for only three years or less, with 19% of the survey active in the industry for a year or less. Preqin notes the following general enthusiasm and satisfaction with hedge funds:

Nearly seven out of 10 investors in North America expect to increase their allocations to hedge funds, while 55% in Europe said the same. And only 4% and 2%, respectively, indicated they would reduce their HF investments.
Public pension plans were among the most optimistic about hedge funds, with 55% looking to boost their allocations and 42% maintaining current levels.

44% responded that HF returns matched their expectations, while 32% said performance exceeded their goals and 24% claim that returns have fallen short of their targets.

When asked to list the most important factors that go into choosing a new hedge fund manager, respondents pointed to performance record of the firm as No. 1, followed by the hedge fund manager’s risk management, and quality/experience of investment personnel.