Hedge funds kicked off the new year on a sour note, losing 0.2% in January, according to the Hennessee Group.
This one-month downturn seemed unlikely to dampen investors' enthusiasm for hedge funds, however, as Deutsche Bank reported Tuesday that investors in its annual alternative investment survey were bullish on industry growth.
Deutsche predicted that hedge fund assets would pass the $3 trillion mark by year-end, based on investors' predictions of $171 billion net inflows and performance-related gains of 7.3%, amounting to $191 billion.
Institutional Allocations Increase
The Deutsche Bank survey included asset managers, public and private pensions, endowments and foundations, insurance companies, funds of funds, private banks, investment consultants and family offices from 29 countries. Forty-six percent of responding investors had $1 billion or more in hedge fund assets under management, and 18% had more than $5 billion.
The survey found that nearly half of institutional investors, which account for two-thirds of industry assets (compared with about one-third before the financial crisis), had increased their hedge fund allocations in 2013, and that 57% planned to do so this year.
Eighty percent of respondents said hedge funds had performed as well as expected or better in 2013, returning a weighted average of 9.3%, according to Deutsche.
In 2014, 63% of all respondents and 79% of institutional investors were targeting hedge fund returns of less than 10%. They mainly favored equity long/short and event-driven strategies.
