Some highlights from the report include:
- The second quarter of 2011 was characterized by tumultuous global markets and uncertainty regarding the financial well-being of a number of euro-zone countries as well as the U.S. Still, investors remained interested in hedge funds and allocated $30 billion to the asset class during the quarter, a small decline from the $32 billion allocated in the first quarter. Despite lackluster returns and markets that proved challenging for hedge fund managers, funds saw strong investment inflows.
- Many investors who had been sitting on the sidelines became more active in the hedge fund space. In a conversation with BHA analysts, a wealth advisor investing on behalf of a large U.S. insurance firm noted that for the past three years, the firm had not been allocating to the hedge fund space. In the second quarter, however, the firm met with new managers, and it anticipates adding three or four global macro and CTA managers as well as two new long/short equity funds to its portfolio by the end of the year.
- Other investors increased their single-manager hedge fund exposure at the expense of their fund of hedge funds allocations. An insurance firm in Bermuda, which has traditionally invested in funds of hedge funds, confirmed that it is planning on investing solely in single-manager funds going forward. In fact, the firm plans on increasing its hedge fund allocation from its current $350 million to $800 million over the next two years. Still other investors were increasing their hedge fund exposure by employing firms to create customized funds of funds on their behalf, essentially designing a tailor-made hedge fund portfolio.
- In the private equity space investors were increasingly interested in sector-focused funds. While interest in funds with diversified sector exposure fell, investor demand grew for funds with exposure to the energy, technology, and clean-technology sectors. Compared with the first quarter of 2011, demand for energy, technology, and clean-technology focused funds grew by 53.6%, 33.1%, and 36.4% respectively.
BHA profiled just fewer than 1200 investor mandates across hedge funds, private equity, real estate, and related funds of funds through extensive one-on-one interviews with institutional investors around the globe.
Editing by Alex Akesson
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