Investors are optimistic in their outlook for the industry in 2018, expecting hedge funds to receive $41 billion in net new investor capital for 2018, according to an annual survey released by Deutsche Bank.
The annual survey, released on 15 February, found in 2017 the hedge fund industry grew by 6.4 percent and assets under management reached an all-time high of $3.21trillion by the end of 2017.
This surpassed the $3.14 trillion predicted by investors in last year’s survey.
Deutsche Bank also found that respondents’ hedge fund portfolios broadly met their 2017 return targets, representing the first year that investors achieved their set targets in four years.
The average respondent’s portfolio achieved a year-to-date return increase of 7.97 percent as of 30 November 2017, compared to an increase of 2.9 percent the year prior.
Elsewhere, the survey found that Western Europe seems to have displaced North America as the most sought after investment region.
Some 37 percent of investors asked are planning to add to their European exposure in 2018, compared to last year’s 17 percent.
Asia was close behind, as 30 percent of investors surveyed said they plan to add to their Asia exposure, which includes Japan. This percentage was 9 percent higher than 2017.
Ashley Wilson, global co-head of prime finance and Europe, Middle East and Africa, head of equity trading at Deutsche Bank, said: “Investors appear more optimistic in their outlook for Europe and Asia.”
“Our survey indicates that investor interest in European hedge funds has more than doubled year on year[...]These regions provide more alpha opportunities across multiple countries with diverse market structures.”
Deutsche Bank stated that the context in which investors responded to the survey was after a strong year for risk assets globally.
In addition, the hedge fund industry ended the year with high single digits, posting the best annual performance since 2013.
Deutsche Bank asked 436 global hedge fund investors, representing two thirds of industry assets.
Marlin Naidoo, global head of capital introduction and hedge fund consulting at Deutsche Bank, said: “While investors are committing more capital to hedge funds as part of their overall portfolio the competition for these dollars remains strong.”
He added: “This is because most investors expect to keep their number of allocations constant, creating a ‘one in, one out’ scenario. Fund managers need to continue to differentiate themselves via outperformance, bespoke fee arrangements and uncorrelated investment strategies.”
