Reuters – Investors may pile more than $200 billion into hedge funds this year, with strategies focused on Asia excluding Japan in greater demand despite concerns about the global economy and waning risk appetite, Deutsche Bank said.
The bank’s annual Alternative Investment Survey also showed that 58 percent of investors would not consider applying leverage — investments with borrowed funds — to their portfolio this year.
"Hedge fund investors’ predictions that Asia, along with the Middle East and Latin America, will be the top-performing regions in 2008 indicate a clear re-allocation of capital towards emerging markets," Denis MacCarthy, head of equity sales Asia ex-Japan at Deutsche Bank, said in a statement on Tuesday.
Deutsche said that 70 percent of hedge fund investors do not currently apply leverage to their portfolios, a sign that market participants are becoming reluctant to take too much risk in the aftermath of the collapse of the U.S. subprime mortgage market, which also blew up several hedge funds.
"For the first year since the survey has been conducted, investors have added risk management as a major manager selection criteria, in addition to investment performance, investment philosophy and manager’s pedigree."
Deutsche said investors are also betting on higher volatility, the third big investment strategy after macro and distressed assets.
