Hedge fund managers need to distinguish themselves from the rest of the market to attract investors that become increasingly concerned about clear investment processes and tighter control over assets managed.
Context Summits' latest allocator report shows that institutional investors plan to increase their allocations in hedge funds. Still, they demand to see greater risk controls and structured investment approaches. 81 percent say that they want to see a clear investment process from managers and 71 percent say they want to see better risk management. When selecting funds, investors look less at the size. For only 37 percent, this is a key determine factors, while 70 percent look more on past performance.
Four fifths of investors asked, including fund of funds, family offices, pensions, endowments and investment consultants, said they want to increase their allocation to hedge funds. 40 percent said that they plan to invest in five or more funds. To do so, most investors (62%) plan to reduce their cash position.
"We believe this year presents a unique opportunity for many managers to distinguish their story and attract institutional capital," said Mark Salameh, CEO and co-founder of Context Summits. Institutional investors are concerned about finding sources of alpha and macroeconomics in general including China’s economy, presidential elections and a lack of fixed income yields.
Other assets interesting for investors were commodities, alternative lending and technology. While most investors expect another or two rate hikes during the year, they do not see an impact on their hedge fund allocation.