Hedge Fund Investment to Spike at $195 Billion

According to the latest numbers from Preqin research, institutional investors are considering hedge fund investments that could be worth a combined $195 billion over the next 12 months.

Investors are prepared to allocate up to $195 billion to hedge funds in next 12 months, according to Preqin's latest hedge fund investor study, based on information from its database of 2,700 investors.

“With nearly a third of the investors on the Preqin database having fixed plans for new investments in the next 12 months, and many others investing opportunistically or considering new allocations, the future is looking bright for the industry," stated Katherine Johnson, the report's author. "Investors could invest up to $195 billion in the next 12 months, with up to 2,000 funds currently being sought. Funds of hedge funds, pension funds, insurance companies and a large number of other investor groups are looking to increase their hedge fund portfolios in the next year. These investors are seeking a wide range of strategies and structures and therefore it is vital that managers have the best intelligence on these investors if they are to gain a slice of this capital."

Of the investors cited in the study, 47% are seeking opportunities to invest in funds of hedge funds, contrasting with recent research by Citi Prime Finance that showed that following the global financial crisis, institutional investors have shifted more to direct investing in hedge funds. The report asserted: "Many pension and sovereign wealth funds began their hedge fund investing program using fund-of-funds as a way to initially access the market and learn about the space. As their education advanced, many chose to begin shifting toward a direct investing program. This was already occurring by 2006-2007, but the financial crisis and Madoff scandal accelerated this trend…”

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