03/01/2012 Author: Will Wainewright

Year ahead to see strong HF inflows, Agecroft predicts

The year ahead will see the strongest net flows into the hedge fund sector since 2007, according to an upbeat series of predictions issued by a leading hedge fund consulting firm.

Agecroft Partners, which also offers third party marketing services, said pensions funds will be the “largest contributor” to asset growth and based its claims on “conversations with more than 300 hedge fund organizations and 2,000 institutional investors during 2011”.

Pension funds will be driven to higher hedge fund investments by their “massive unfunded liability” and more will invest directly in hedge funds, as opposed to starting with funds of hedge funds, Agecroft predicted.

Some have questioned whether investors will maintain allocations to the industry at their current level following poor returns last year, in which the average hedge fund lost -4.4% according to the HFRI Composite Index.

There will also be a “greater focus on smaller, more nimble managers” after the “significant publicity” generated by the poor performance of larger funds this year, the report continued.

Hedge fund veteran John Paulson was the prime example of the struggles experienced by some bigger fund managers in 2011 – his flagship Advantage fund was down 36% on the year in late December.