Credit Suisse today announced the results of its mid-year Hedge Fund Investor Sentiment Survey, which polled over 200 global institutional investors representing almost USD 700 billion in hedge fund investments. Participants were surveyed on their hedge fund activities during the first half of the year as well as strategy appetite and allocation plans for the second half of the year. This survey follows Credit Suisse’s Annual Global Investor Sentiment Survey that was conducted in January 2016.
Key highlights from the survey included:
- Despite the majority of institutional investors redeeming from hedge funds during the first half of this year, most continue to view hedge funds as playing a key role in their investment portfolios as 73% of respondents will likely make additional hedge fund allocations during the second half of 2016.
- Redemptions appear to have been highly targeted as 63% of investors indicated that the primary driver of first half redemptions was specific fund underperformance or style drift. 11% of investors attributed redemptions to changes in their asset allocation model, while only 9% said that they were a result of disappointment with the performance of their hedge fund portfolios in general.
- The top 3 most frequently mentioned strategies being considered for second half allocations were Equity Long/Short, Equity Market Neutral and Global Macro, which were also three of the top strategies in the Credit Suisse Annual Investor Survey conducted earlier this year.
Robert Leonard, Managing Director and Global Head of Capital Services at Credit Suisse commented:
“Despite some outflows from the hedge fund industry this year, most institutional investors appear to be staying the course and intend to recycle the vast majority of capital back into other hedge funds.
“Investors also indicated that their redemptions have been highly targeted and selective mostly driven by specific fund performance rather than an overall change in attitude towards hedge funds in general.
“It is notable that while some investors expect to make additional redemptions in the second half of this year, almost three quarters indicated that they will also likely be making new allocations to hedge funds during that time as well. This confirms institutional investors continue to see a role for hedge funds in their portfolios.”
Other findings from the survey included:
- The majority of investors (84%) confirmed that they had undertaken some level of redemptions from their hedge fund portfolio during the first half of this year.
- 82% of investors who redeemed from hedge funds during the first half indicated that they would likely reallocate that capital to existing hedge funds in their portfolio as well as to new funds. Only 9% of investors said that they were not likely to reallocate redeemed capital to hedge funds.
- Main drivers for potential future allocations were identified to be opportunistic, based on strategy or manager performance (60%) and continued outperformance of current hedge fund allocations (12%).
- Pension funds proved to be the “stickiest” investors during the first half of this year with 31% reporting no redemptions to their hedge fund portfolios. That was followed by endowments/foundations at 25%, family offices at 13% and fund of funds at 8%.
- With respect to preferred structures (other than traditional Master/Feeder), investors indicated additional interest in Liquid Alternatives, Risk Premia vehicles and Equities Co-Investment.
- Looking ahead, 76% of US investors said they would likely make second half allocations to hedge funds. 86% of APAC investors and 64% of EMEA investors indicated they were also likely to do so.
About the respondents
The survey covered institutional investors on a global basis including fund of funds, family offices, consultants, endowments & foundations, private banks and pension funds. 67% of responses came from the Americas, while 25% came from EMEA-based investors and 8% came from APAC.