Global hedge fund assets may rise 12 per cent this year to a record $2.26 trillion, as investors reduce cash and seek returns, according to an annual survey of investors by Deutsche Bank AG. The industry may attract $250 billion of new capital this year, according to the survey. The number of investors with 10 per cent to 30 per cent of their holdings in cash is expected to halve in the next six months, helping free up $39 billion for potential hedge fund investments, the survey showed.
Investors are betting on positive returns and growth in hedge funds even after market selloffs followed by “quick and exaggerated snapbacks” made it difficult for many managers to consistently make money last year, according to the report. Hedge funds globally lost 5 per cent on average, the second-worst annual return since Chicago-based Hedge Fund Research Inc. began to track data in 1990.
“Performance is key in a low-yield environment,” said Anita Nemes, London-based global head of capital introductions in Deutsche Bank’s prime finance division. “Institutional investors recognise the potential for strong hedge fund returns in 2012.”