A survey of family offices around the world finds that the vast majority predict a rise in money-raising by hedge funds by 10 per cent or more in the next three years, coming at a time when recent data points to robust returns in the industry.
show that its HFRI Fund Weighted Composite Index gained by 1.2 per cent in September, and is up 8.06 per cent so far this year; the HFRI Asset Weighted Composite Index rose by 1.4 per cent for the month, and up 6.53 per cent since January.
While hedge funds’ performance has waxed and waned in recent years, their ability to deliver returns in different market conditions – by short-selling for instance – continues to keep them in favour as an investment tool. Total assets under management at hedge funds hit a record $4.6 trillion at the end of the first quarter this year.
The research for Beacon, a platform for portfolio analytics and risk management, shows that all family offices questioned think that investing in hedge funds will be attractive in terms of risk-adjusted returns over the next five years, with 12 per cent describing it as very attractive.
But family offices have concerns about how transparent hedge fund managers are about how they operate. Some FOs want the quality and transparency of hedge funds to improve, with 9 per cent wanting it to improve “dramatically,”, and 85 wanting a general improvement.
Also, worryingly, 82 per cent have decided not to invest in a particular fund because of concerns over its risk management, and almost all (94 per cent) think that this will be a growing trend.
As part of its study, Beacon surveyed a range of institutional investors including pension funds, insurance asset managers and family The research found that this group was most optimistic about pension funds, expecting 81 per cent to increase their hedge fund allocation by 10 per cent or more, compared with 54 per cent of sovereign wealth and 49 per cent of wealth managers/retail investors (see chart below from Beacon).
Strategy performance
In its figures for September, HFR said event-driven strategies, which often focus on out-of-favour, deep value equity exposures and speculation on M&A situations, led strategy gains in September as the US Federal Reserve lowered interest rates, with the HFRI Event-Driven (Total) Index rising by 1.8 per cent.
The HFRI ED: Distressed/Restructuring Index led Event-Driven sub-strategy performance in September, advancing 2.2 per cent.
Macro strategies also advanced in September, reversing four consecutive monthly declines as interest rates fell.
The HFRI Macro (Total) Index advanced 1.3 per cent and the HFRI Macro (Total) Index – Asset Weighted added 1.4 per cent in September, led by Discretionary Thematic and Multi-Strategy exposures, as managers positioned for continued falling rates and an improving global economic outlook.
HRF said that Equity Hedge funds, which invest long and short across specialised sub-strategies, also posted strong performance for September. The HFRI Equity Hedge (Total) Index advanced an estimated 1.2 per cent for the month to bring the year-to-date return to 10.2 per cent, leading all main strategy indices so far in 2024.