Hi all, Deutsche Bank recent released its Twelfth Annual Alternative Investment Survey: Alternative Investment Survey
- Investors remain bullish on industry growth – hedge funds are expected to reach a record breaking $3 trillion by year end 2014, up from $2.6tn as of 2013 year end. This is based on investors’ predictions of $171 billion net inflows and performance-related gains of 7.3% (representing $191 billion)
- Commitment from institutional investors continues to strengthen – nearly half of institutional investors increased their hedge fund allocations in 2013, and 57% plan to grow their allocations in 2014. Institutional investors now account for two thirds of industry assets, compared to approximately one third pre-crisis
- Investors are happy with hedge fund performance – 80% of respondents state that hedge funds performed as expected or better in 2013, after their allocations returned a weighted average of 9.3% in 2013. 63% of respondents, and 79% of institutional investors, are targeting returns of less than 10% for their hedge fund portfolios in 2014. Equity long short and event driven are the most sought after strategies.
- 2 & 20 is not the norm – Investors today pay an average management fee of 1.7%, and an average performance fee of 18.2%. While fees have come down slightly, investors remain willing to pay for performance: almost half of all investors would allocate to a manager with fees in excess of 2&20 where the manager has proven ‘consistent strong performance in absolute terms’.
- A bigger part of a bigger pie – hedge funds get reclassified. 39% of investors are now embracing a risk-based approach to asset allocation, up from 25% in 2013.
My summary of the survey findings/ main data categories are attached in PDF (Deutsche Twelfth Annual AI Survey)….and more newsflow on Hedge funds below.