Hedge funds are not dead, and they are most certainly not considered ‘suckers’ by their sophisticated and rich institutional investors. The new Credit Suisse Hedge Fund Investor Survey finds that 88% of the 185 polled investors intend to remain not only active with their hedge funds but also plan to increase their allocations in these funds in the second half of this year.
The response of these clients is particularly noteworthy when it is put against the poor performance of hedge funds in the last quarter. Hedge funds gave back the bulk of their gains in the May-June period amid central bank chaos and frantic selling of risky assets. As per Eurekahedge, in June the hedge fund industry saw outflows of $21 billion, bringing total assets to $1.89 trillion. Most of the analysts have been predicting a correction in Q2 since the last year. It is surprising that despite such convinced forecasts, several of the top hedge fund managers were unable to save themselves and meely mimicked the performance of stock markets.
Hedge Fund long/short Equity A favorite Strategy
The other questions that Credit Suisse probed in its survey were about the strategies these investors were most interested in and where they would cut down their allocations. Unsurprisingly, Long/Short equity fundamental was most popular among investors with a net demand of 57% , whereas event driven strategies came at second with demand of 47% and global macro was the choice of 39% of investors.
Hedge Funds Losing Interest In Emerging Markets
The change that is noticeable here from the CS survey conducted at the start of 2013 is that now investors are visibly less interested in Emerging Markets, which was the second favorite strategy by net demand six months ago. The results also pointed out that highest number of net redemptions will be experienced by Commodities and Emerging Market Credit strategies in the coming months.
Among Asian investors Long/Short equity trading was strategy of choice of institutional investors with a net demand of 50%, whereas Long/Short equity fundamental was the second most popular choice and global macro was the third most popular. Notably demand for global macro hedge fund strategy among American investors was low at 20% whereas in EMEA region, net demand for global macro was quite high at 52%.
Robert Leonard, Managing Director and Global Head of Capital Services at Credit Suisse, said that what this survey implies is that investors are increasingly moving away from emerging market and fixed income strategies—these outflows will furnish demand for equity focused hedge fund strategies in the second half of 2013.