According to this year’s annual survey by Deutsche Bank involving 413 global investors, net inflows into hedge funds are expected to triple in 2014, from $63.7 billion last year to an estimated $171 billion.
Hedge fund assets are expected to grow from $2.6 trillion to $3 trillion as returns continue to improve — they were 9.3% last year and are expected to be 9.4% this year. The percentage of investors who plan to increase their allocation to hedge funds is expected to rise from 47% last year to 62% this year.
Institutional investors such as pensions, foundations, insurers and endowments now hold two-thirds of hedge fund assets, up from one-third prior to 2008. A significant increase is expected in stock-focused hedge funds; the most sought-after strategies (in order of popularity) are expected to be funds that bet on the rise or fall of stocks, corporate events like M&A and global economic trends.
According to Deutsche Bank’s Angharad Fitzwilliams, “With the end of quantitative easing and an unexpected increase in volatility and dispersion, 2014 may prove to be more of a stock picker's market. Investors believe economic fundamentals, as opposed to political rhetoric, are going to have a greater influence on global asset prices over the next 12 months.”
