Finance Publishing International has announced that the fifth annual survey of the Hennessee Hedge Fund Advisory Group has been completed, with results showing that hedge funds reportedly met or exceeded expectations for 85% of hedge fund investors.
More than half of the investors surveyed (54%) said that they intend to increase their hedge fund allocation in the coming 12 months, up from 45% in the 2001 survey. This, in addition to the 38% growth in industry assets, illustrates that hedge funds are growing in use for portfolio diversification and downside risk protection.
The Hennessee group says that the performance of hedge funds in 2000 and 2001 has made it increasingly prudent to consider hedge funds as an investment alongside stocks and bonds. *”In fact, someday, it will be considered imprudent not to include hedge funds within a stock and bond allocation,”* commented Charles Gradante, president and CEO. Hennessee is a global hedge fund investment consulting firm advising individuals and institutions on over $1bn in assets.
· The largest investors in hedge funds continue to be individuals and family offices, with 56% of the capital in the industry.
· The largest increase in hedge fund investments came from funds-of-funds, with a jump from 3% in the 2001 survey to 15% in the 2002 survey.
· The total amount of assets investors have in hedge funds is steadily on the rise, reaching 41% in the 2002 survey, up from 37% in 2001 and 33% in 2000.
Other relevant findings from the 2002 Hennessee Hedge Fund Investor Survey include:
· 40% of respondents intend to increase their fund-of-funds allocation in 2002.
· With the growth in the industry, more investors are turning to consultants for advice: 41% indicated they use a consultant, up from 29% in the 2001 survey.
· The 2002 survey shows that managers effectively addressed the concerns of investors. Only 17% of investors desire better risk management versus 45% last year and only 16% of investors desire better performance versus 29% last year.
· Convertible arbitrage and merger arbitrage constituted the largest share of assets in the industry, with 16%, versus the 2001 survey, where event-driven and distressed comprised 16% of the industry.