Pension funds, family trusts and other investors are expected to invest at least $50bn in hedge funds this year, according to a study by Barclays Capital. However, they will demand easy access to their money and will focus on the simplest investment strategies.
The study is based on analysis and interviews with investors and hedge fund managers representing $700bn of hedge fund assets, or half of the global industry.
It says that, while the traditional ??two and 20? fee model ?? under which hedge funds charge a 2 per cent management fee and a 20 per cent performance fee ?? has survived the industry turmoil, managers will be encouraged to embrace structures to promote transparency and better align incentives.
Family trusts and pension funds are expected to be the most active allocators in 2009 ?? a shift from last year, which was dominated by endowments and foundations.
Pensions, traditionally limited in their hedge fund allocations, are expected to increase the weight of hedge fund exposure in their portfolios, alongside family trusts.
Meanwhile, insurance companies, private banks, endowments and foundations are all likely to decrease their allocations to hedge funds.
Brian Reilly, managing director at Barcap, said: ??We found that in spite of dramatic changes in the investor landscape, certain investors were ready to deploy their cash balances aggressively once markets stabilised.
??Managers who develop early relationships with new investors will be the primary beneficiaries of this trend.?
Surveyed investors expressed a sharp trend away from highly leveraged strategies into simpler, more liquid strategies and those that focus on opportunities in dislocated markets, notably distressed and directional credit.
The top three hedge fund investor segments are American pensions with $306bn in investable assets, American private banks with $216bn, and European private banks with $177bn.
