Investors predict continued growth in alternative investments, with an estimated net inflow of $140 billion in 2012, taking industry AUM to an all time high of $2.26 trillion by year-end, according to Deutsche Banks tenth annual Alternative Investment Survey.
The survey was conducted in December 2011 by the Banks Global Prime Finance business. Approximately 400 investor entities worldwide, representing more than $1.35 trillion in hedge fund assets and over two thirds of the entire market by AUM, participated in the investor survey. Respondents include public and private pensions, foundations and endowments, government organizations, funds of funds, private banks, investment consultants and family offices. To commemorate its tenth anniversary, this years survey includes ten trends to watch in the hedge fund industry.
The survey found increased institutional participation is driving growth as hedge funds become an established and formidable part of the investment landscape. Institutions now account for approximately two thirds of hedge fund assets compared to less than one fifth in 2003, said the survey.
The survey noted that consolidation will continue and large, successful funds will become even bigger. 44% of respondents are invested in managers with over $1bn in AUM, up from 25% in 2009. Nearly a third of respondents plan to allocate to managers with more than $1 billion in AUM.
Performance has consistently ranked as a key criterion for manager selection over the past 10 years. 80% of respondents ranked performance as one of the five most important factors this year, as investors remain committed to seeking talented, topperforming managers irrespective of size.
The past 10 years have seen hedge funds add an impressive $1.39 trillion in assets, said Barry Bausano, co-head of Global Prime Finance and Head of Equities in the Americas. Investors are committed to top performing managers, with cash holdings potentially adding an extra $39bn to the industry over the next six months.
Performance continues to be key, and an increasing number of institutional investors recognize the added benefits hedge funds offer to their portfolios, said Anita Nemes, global head of Capital Introduction. An impressive 80% of institutional investors either grew or maintained their hedge fund holdings in 2011 in a bullish endorsement of the hedge fund industry.
(JDC)