Institutional investors and wealth managers are expected to increase hedge fund strategy allocations over the course of the next year, recent research from international asset management firm Managing Partners Group (MPG) says.
36 per cent of the institutional investors and wealth managers polled expect a dramatic increase in hedge fund allocations, with 57 per cent predicting a slight increase. This is driven primarily by an interest in diversifying portfolios, according to the research — 62 per cent of investors cited this as the main client benefit.
Further benefits of hedge fund investments include a potential for larger returns than those received through traditional strategies (named by 52 per cent of participants), and the opportunities that hedge funds can exploit amongst continual volatility.
Another key growth area will be arbitrage funds, the report states. This strategy is increasing in popularity, having performed well in volatile markets and holding the potential to produce significant returns if multiplied by a large volume. A third of study participants expect dramatic allocations growth in this space, MPG says, and 59 per cent anticipate a slight increase.
The study questioned 100 professional investors from Germany, Switzerland, Italy, the UK and the US.
Jeremy Leach, CEO of MPG, says: “The opportunity for uncorrelated returns to main markets and global macro issues is a key differentiator for hedge funds and it is clear that institutional investors and wealth managers will continue to increase allocations to hedge funds over the year ahead with arbitrage funds in particular seen as a sector that will benefit.”
