Credit Suisse Releases 8th Annual Hedge Fund Investor Survey
NEW YORK, March 3, 2016 /PRNewswire/ — Credit Suisse today releases its eighth annual Hedge Fund Investor Survey, entitled “Staying the Course”, in which responses from 369 institutional investors, representing $1.1 trillion of hedge fund investments, were analyzed on a number of topics including:
- Key Industry Trends and Forecasts
- Growth and return prospects for the industry
- Strategy preference and allocations plans
Key highlights from the 2016 Credit Suisse Annual Hedge Fund Investor Survey:
- Sentiment overall was positive for hedge fund industry growth with investors forecasting a 3.5% increase in hedge fund industry AuM during 2016. If accurate, this projection would push industry assets over $3 trillion with an upper quartile forecast for $3.2 trillion by year end.
- 87% of investors indicated that they would maintain or increase their hedge fund allocations in the coming year. Within that universe, insurance companies identified themselves as being most underweight hedge funds (compared to institutional peers), which could allow for further growth.
- Equity Market Neutral-Fundamental was forecast by investors to be the most preferred strategy for 2016 with 34% net demand. This represents a move up from the #5 ranked strategy in our 2015 survey. Equity Market Neutral-Quantitative was the second most preferred strategy with 30% net demand (also improving from last year when it was ranked 7th).
Robert Leonard, Managing Director and Global Head of Capital Services at Credit Suisse, said:
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“Institutional investors remain committed to their hedge fund allocations and are optimistic for further growth in the industry during the upcoming year. This year’s survey provides some interesting insights into how institutional investors are considering positioning their hedge fund portfolios for the possibility of continued volatility in global markets.”
“Increased interest in strategies such as equity market neutral, global macro and equity long/short trading-oriented appears to indicate that investors are anticipating another challenging environment for 2016. Key factors noted in making new allocations were net returns, pedigree of investment team and lack of correlation with other investments.”
Annual Hedge Fund Investor Survey – Other findings from the Survey included:
- Global Macro-Discretionary (net demand 29%) was the 3rd highest preferred strategy according to investor responses, falling slightly from the top spot last year, but remaining a key area of focus for allocators.
- Investors also ranked Equity Long/Short-Trading (net demand 21%) and Equity Long/Short–Fundamental & General (net demand 18% each) in the top 5. The increase in interest for Equity Long/Short-Trading was significant; it moved up from last year where it was ranked 15th.
- Sector Funds: Appetite for TMT strategies (net demand 11%) moved up to the top ranked sector, while Healthcare (7% net demand), which was last year’s top ranked sector, fell to the second spot. Interest in Financials sector (net demand 6%) also increased in this year’s survey.
- Regional preferences: Interest for Developed Europe (36% net demand) had the largest increase over last year and remained in the top spot. Asia Pacific (28% net demand) and Global strategies (26% net demand) followed behind with Japan focused strategies (17% net demand) next in line.
- Key Factors in Selecting Hedge Funds: The top three factors indicated when selecting hedge funds for an institutional portfolio are returns after fees, pedigree of risk takers & core team stability and non-correlation with other investments. Other factors include degree of transparency and ability to lower volatility in the overall portfolio.
- Drivers of Redemptions: Only 2% of investors highlighted a lower target weight of hedge funds in their portfolio as the key driver of their redemptions last year. Almost half of respondents highlighted individual manager underperformance as the key reason for the redemptions they made in 2015 with 25% indicating a top down shift in strategy preference as their main factor.
- Significant Developments: When asked to opine on potentially significant developments that could occur in 2016, investors listed renewed focus on short-selling skills, potential for asset/liability mismatches, fee compression, additional fund closures and increased competition from alternative structures (such as UCITS, Liquid Alternatives and Co-Investment funds).
The Annual Hedge Fund Investor Survey produced by Credit Suisse’s Hedge Fund Capital Services Group, is one of the most comprehensive in the industry—focused on pension funds, endowments, foundations, consultants, family offices and funds of hedge funds—and with respondents diversified across all regions.