Despite the ups and down of 2018, there is reason to be bullish on the hedge fund industry. Nearly 80% of institutional investors surveyed by Preqin plan to maintain or increase their allocation to hedge funds in 2019. This figure is higher than in each of the previous three years.
Why do institutional investors and others continue to rely on hedge funds to help meet their fiduciary responsibilities? Because these funds provide value by diversifying portfolios, managing risk and helping deliver reliable returns over time. Since the first hedge fund was created 70 years ago, the industry has played an active and dynamic role in capital markets by partnering with investors to help meet their unique investment goals.
“Although the majority of investors reported that their return expectations had not been met in 2018, investors are turning to hedge funds to protect against a market correction in 2019. Therefore, it will be the defensive properties that a hedged portfolio can add going forwards that is driving investor decision making today.” – Amy Bensted, Head of Hedge Funds, Preqin
Four Takeaways From Preqin’s 2019 Global Hedge Fund Report
Optimistic Investors: the proportion of investors looking to maintain or increase their exposure to hedge funds (79%) is the largest since 2014.
Record AUM: assets under management remained near an all-time high at $3.5 trillion at the end of 2018.
Lower Volatility: hedge funds were nearly 60% less volatile than the S&P 500 index over a 10 year period (5.59% vs. 13.6%).
Portfolio Diversification: the largest proportions of investors cite diversification (64%) and low correlation (42%) as the main reasons for investing in the asset class.