Hedge Fund Investor Expectations
Hedge Fund Investors Sticking with Industry in 2013When hedge funds lagged behind the soaring S&P this year, many analysts and industry watchers predicted that investors would leave hedge funds in droves for better-performing investment options with lower fees. Yet, institutional investors continued to keep their money invested in hedge funds and expect to do so again in 2013, according to a survey at a recent hedge fund conference. Investors have lowered their expectations to single digit returns but they remain dedicated to hedge funds despite laggard performance on average.
When big institutional investors were recently polled at a recent Goldman Sachs hedge fund conference about their return outlook for hedge funds, the overwhelming majority of them said they expected single digit returns in 2013.
It’s those low expectations, more than perhaps anything else, that explains why big investors appear to be sticking with hedge funds in 2013 despite coming off another disappointing year.
For the most part, hedge funds got trounced by the market last year. The average hedge fund gained 5.5% in 2012, according to HFR, which meant investors of hedge funds were paying rich fees while low-fee S&P 500 index funds returned 16% in 2012.
Nevertheless, several people in the hedge fund business say there is no huge redemption wave hitting the industry and, by and large, big institutional investors have elected to remain heavily invested in hedge funds for 2013. New data released yesterday by TrimTabs and BarclayHedge showed hedge funds actually experienced $4.7 billion of inflows in November, reversing $10.3 billion of outflows in October. Industry outflows totaled a mere $8.2 billion from January to November. Source