30/03/2011 Author: Shannon Hawthorne

Smaller hedge funds set to benefit from 2011 inflows

The global hedge fund industry could see fresh inflows of $150bn this year, with small- to mid-sized funds likely to enjoy increased investor interest, the audience at this month’s UK HFMWeek Breakfast Briefing, on ‘better investor relations’, heard.

According to Mairead Kenny, head of capital introduction for Emea at Bank of America Merrill Lynch, who spoke on the panel, net inflows in 2011 are set to surpass last year’s figure of around $55bn, as estimated by Hedge Fund Research (HFR), as institutional investors continue to make new investments into the sector.

“Last year was a turning point in the post-2008 world,” she said. “The industry is back at its peak.”

Kenny added that while, in recent years, the bulk of inflows have gone to managers with over $5bn in assets under management (AuM), investors are now showing an interest in managers within the $1bn-$5bn range, a notion supported by recent data from HFR, which revealed that nearly half of all inflows in Q4 2010 went to funds with less than $5bn AuM.

The panel pointed to global macro, relative value and event-driven strategies as offering significant investment opportunities, while long/short equity was also highlighted as having recently enjoyed a boost in popularity.

Guy Saintfiet, UK head of liquid alternatives at Aon Hewitt, told the audience that some investors are concerned about correlation between hedge funds – in particular, funds of hedge funds – and equity markets.

“Hedge funds need to remember that pensions not only invest because of outright returns but also because of diversification benefits, so the managers should focus on trying to diversify as much as possible,” he said.The global hedge fund industry could see fresh inflows of $150bn this year, with small- to mid-sized funds likely to enjoy increased investor interest, the audience at this month’s UK HFMWeek Breakfast Briefing, on ‘better investor relations’, heard.

According to Mairead Kenny, head of capital introduction for Emea at Bank of America Merrill Lynch, who spoke on the panel, net inflows in 2011 are set to surpass last year’s figure of around $55bn, as estimated by Hedge Fund Research (HFR), as institutional investors continue to make new investments into the sector.

“Last year was a turning point in the post-2008 world,” she said. “The industry is back at its peak.”

Kenny added that while, in recent years, the bulk of inflows have gone to managers with over $5bn in assets under management (AuM), investors are now showing an interest in managers within the $1bn-$5bn range, a notion supported by recent data from HFR, which revealed that nearly half of all inflows in Q4 2010 went to funds with less than $5bn AuM.

The panel pointed to global macro, relative value and event-driven strategies as offering significant investment opportunities, while long/short equity was also highlighted as having recently enjoyed a boost in popularity.

Guy Saintfiet, UK head of liquid alternatives at Aon Hewitt, told the audience that some investors are concerned about correlation between hedge funds – in particular, funds of hedge funds – and equity markets.

“Hedge funds need to remember that pensions not only invest because of outright returns but also because of diversification benefits, so the managers should focus on trying to diversify as much as possible,” he said.