Hedge fund investors may invest up to $400 billion (€315.4 billion) in 2012, a mixture of money re-allocated from other asset classes, and existing investments switched between portfolios already in the sector.
Of the new flows, investors plan to allocate most to global macro and systematic/volatility strategies, as they look for tactical and trading-oriented strategies with relatively low correlation to equities.
Barclays Capital produced the numbers last Friday based on a survey of 165 investors at a symposium in New York, plus one-to-one interviews, and other industry research. The surveyed investors manage about $500 billion in hedge funds – or one-quarter of the industry’s total assets.
While new investors will look for global macro and volatility strategies, existing investors who re-allocate between portfolios will be active most significantly within equity and credit strategies, reflecting a combination of investors’ redemptions from poor performers, their belief in mean reversion, and a preference for more specialised products within these strategies.
New flows could be in the region of $80 billion and re-allocations could be worth some $350 billion. The total amount invested could range between $350 billion and $400 billion.
Barclays Capital says that, based on investor preferences, the trend for smaller funds (less than $1 billion in assets) to pick up more assets is set to continue. During the first nine months of 2011, small hedge funds doubled their share of total new flows from 9% in 2010 to 18%.
For 2012, that trend is likely to continue, with investors indicating a 77 percentage point tilt in favor of allocating to small funds. This compares with only a 10 percentage point tilt toward increasing allocations to large funds (assets over $5 billion).
©2012 funds europe