Investor Satisfaction with Hedge Funds Reaches Highest Level

According to a survey by Preqin, institutional investor satisfaction with hedge fund performance in 2013 has reached the highest level of any year that Preqin has conducted the survey.
By Jake Safane(2147484770)
According to a survey by Preqin, institutional investor satisfaction with hedge fund performance in 2013 has reached the highest level of any year that Preqin has conducted the survey.

Preqin surveyed 148 institutional investors with more than $60 billion invested in hedge founds and found that 21% thought hedge fund performance exceeded their expectations, while another 63% had their expectations met. In comparison, only 3% of investors felt that performance exceeded their expectations in 2012, and 57% thought it met their expectations that year. Preqin found that as of November 30, hedge funds have gained 10.04%, whereas returns were 8.24% in 2012. And if December’s returns are on par with how performance has been the rest of the year, 2013 could have the highest net returns since 2010.

“At the start of 2013, we predicted that a need for solid performance and regulation would be key issues for hedge funds in 2013,” says Amy Bensted, head of hedge fund products at Preqin. “Certainly the year has proven both of these predictions to be true, and in terms of performance it appears that many hedge fund managers have fared well this year, and investors are largely satisfied with how the industry has performed. The proportion of investors that felt that their returns expectations had not been met has fallen to its lowest level since Preqin started gathering this information, in noticeable contrast to 2012 and 2011, when dissatisfaction was at high levels among institutional investors.”

While 29% of investors said that producing high absolute returns is the most important factor for hedge funds, another 28% sought consistency of returns, and 25% sought strong risk-adjusted returns.

“As other results in our forthcoming 2014 Preqin Global Hedge Fund Report show, investors are looking for more than just the size of the returns their funds are posting; strong risk-adjusted returns as well as consistency and low volatility of performance numbers are also key attributes sought from hedge fund investments,” says Bensted. “Coupled with investors changing their outlook on their hedge fund investments and adjusting their returns expectations, we have also seen hedge funds perform consistently well over the past two years, which is also leading to increased confidence in the asset class.”

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