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Investors More Open to Longer Mandates, According to Report


Date: Tuesday, December 18, 2012
Author: Ahila Karan, ProHedge.co.uk

This year’s Preqin investor survey showed the number of hedge fund investors demanding more liquidity from portfolio managers fell by 36% this year. Amy Bensted, Preqin’s Head of Hedge Fund Products, tells Investments and Pensions Europe, findings show that increased liquidity forgoes potential returns. 

Higher frequency redemption agreements (higher liquidity) on long/short funds return lower profits; daily and weekly redemptions generate lower returns (28% and 36% respectively since 2007) compared to quarterly redemption arrangements (58%).

The report finds investors embarking on illiquid asset and event-driven strategies have tended to accept longer redemptions. “Notably, those investors with long-term investment horizons are even willing to accept funds with longer lock-ups than last year”

Reduced investor pressure for liquidity is, Bensted explains, “because institutions have adjusted their portfolios over the past four years and have reached a satisfactory level of liquidity, or because stronger performance of more illiquid funds has proved appealing to some groups.”