More than a third of respondents plan to increase their hedge fund allocation in the second half of the year, and while this was down slightly from a previous survey, it could be due to a feeling of overallocation. Half of the respondents plan to keep their current allocation level.
“Investors value the ability of hedge funds to protect themselves against downside risk and to deliver consistent performance in a variety of market conditions,” said Tom Kehoe, managing director and global head of research and communications at AIMA. “Not surprisingly, the vast majority of investors are happy with the performance of their hedge funds and are considering their future allocation plans accordingly. If the industry’s performance in the first half of the year can be sustained for the remainder of the year, it will have given investors the highest returns in over a decade. “
Among those planning to increase their hedge fund allocations, new opportunities within the class are a major driver (38%), followed by the continued expectation of strong returns (31%).
Global macro strategies are likely to see the strongest inflows in the second half of the year (32% of investors plan to rise), with investors particularly interested in the strategy’s ability to hedge against rising inflation. Long / short equity and multi-strategy funds can also expect considerable investor interest with a planned increase of 31%.
Private lending has been cited as the most popular strategy by investors to counter low bond yields.