GLOBAL - Almost a third of pension funds and other institutional investors intend to increase hedge fund investment over the next year, research shows.
A survey of 50 global hedge fund investors by Preqin found 29% intended allocate more capital to the asset class over the next 12 months while 56% plan to keep their exposure at the same level. Some 15% intend to cut their hedge fund holdings.
However, 69% of investors feel the hedge funds within their portfolios have either met or exceeded return expectations, a drop from 73% of investors surveyed in 2009.
The research also found 26% of institutional investors are below their target allocation to hedge funds, with 64% at their current targeted exposure and 10% currently over-exposed to hedge funds.
Meanwhile, 37% of institutional investors intend to increase the number of funds they are invested with over the next 12 months, 53% intend to maintain the current and 10% plan to reduce the number of managers they invest with.
Over the longer term (three to five years), 46% of surveyed investors intend to increase their exposure to hedge funds. Managers have also seen growing demand from pension funds for more onshore products (Global Pensions: 10 August, 2010).
Hedge Fund Data manager Amy Bensted said: "Despite a slight drop in investor satisfaction in hedge fund returns over the past 12 months, institutional investors are beginning to invest more capital in hedge funds in greater numbers than they were a year ago.
"With 29% of institutional investors planning to allocate more capital to hedge funds in the next 12 months and just 15% looking to make cuts, the balance of inflows into the asset class is positive.
"Furthermore, 37% of institutional investors are planning to add new funds to their portfolio in the next 12 months and are actively seeking relationships with new fund managers.
"The long-term outlook for the asset class is even more positive, with 46% of investors planning to increase their exposure to hedge funds over the next three to five years."
Research published by Towers Watson last month found pension fund allocations to alternatives increased almost three-fold over the last 10 years (Global Pensions: 12 July, 2010).
The PLSA's Richard Butcher says we should all work harder to reconnect with the saver, be open with them and tell them the truth
Trustees lack expertise, time and resources to develop effective communications on technical pensions issues and need professional help, a major review of the British Steel saga has concluded.
In this week's Pensions Buzz, we want to know if you think trustees should consult directly with members before agreeing to a DB superfund buyout.
Thousands of savers taking tax-free lump sums ahead of retirement are at risk of a pensions shortfall in later life due to neglecting their remaining pot, Zurich has warned.