Earlier today, industry data provider Preqin released a report that illustrates why investors choose to invest in hedge funds and how they measure the performance of those investments. “The Real Value of Hedge Fund Investment” uses comprehensive new data to show how institutional investors use hedge funds in their portfolios and how they actually benchmark the success of those investments.
Richard H. Baker, MFA’s President and CEO, commented on the report, saying, “Preqin’s report demonstrates the unique nature of each partnership between a fund and its investors, as they work to achieve a specific set of goals and objectives. Funds employ strategies and trading styles as unique as the objectives of the investors they partner with, and this report underscores the importance of viewing the industry not as a monolith but as a dynamic collection of funds with different strategic approaches.” He continued, “When measured against the actual objectives set forth by investment partners, hedge funds are performing quite well, with 84 percent of investors indicating funds have ‘met or exceeded’ expectations over the past year.”
Preqin’s report notes a number of interesting data points, including the fact that 80% of investors said that removing hedge funds would increase risks in their portfolios. Regarding performance, Preqin found that “producing high returns, a perception many outside of the industry believe is the domain of the hedge fund, is a priority for just a small proportion (7%) of the investors that participated in Preqin’s survey.” Remarkably, nearly every class of institutional investors has, on average, increased allocations to hedge funds since 2012. These new investments correlate with data that show a strong majority of institutional investors view their hedge fund investments have met or exceeded expectations over the past year, three years, and five years, respectively.
It is clear from Preqin’s report that, when viewed through the eyes of hedge fund investors, the performance of the industry continues to meet investor expectations on a number of fronts. Read the full report from Preqin here, and also read MFA’s statement regarding the report here. For more on hedge fund performance, access MFA’s performance webpage here.