GLOBAL - Hedge fund providers are set for a bumper year as one-third of institutional investors revealed plans to increase allocations to the asset class, industry research revealed.
A survey of 50 leading global institutional investors, conducted by Preqin, found 29% planned to up their hedge fund holdings in the next 12 months, while 56% planned to keep allocations at the same level.
Just 15% said they planned to reduce their hedge fund investments.
Nearly one-quarter (23%) of respondents said they planned to appoint new hedge fund managers to run their burgeoning allocations, proffering providers with a healthy source of new business in the coming year.
"There are many opportunities to gain institutional support for hedge funds in the current market, and it is especially important that managers seeking to raise capital are able to identify those investors exhibiting a preference for their fund types in order to be efficient and successful in the fundraising market," the report stated.
Long/short equity and global macro are the most favoured hedge fund strategies, with institutional investors seeking to invest in the most liquid opportunities.
According to Preqin, the growth in institutional interest in hedge fund investment will come as welcome relief to the sector since it saw its high net worth customer base shrink following the financial crisis of the past two years.
"A reduction in high net worth capital available to the industry [has made] the advantages of more stable long term capital in the form of institutional support increasingly appealing to hedge fund managers, with many firms previously only utilising high net worth capital now seeking to garner institutional commitments for the first time," the report stated.