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Hedge Funds

EY: Institutional investors maintaining hedge fund levels, moving more to custom arrangements

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Some 74% of institutional hedge fund investors intend to maintain their current hedge fund allocation, while 11% plan to increase the size of their portfolios and 15% will reduce the size of their pool, showed new research from a survey conducted by financial services company Ernst & Young Global.

By contrast, in 2016, 69% of respondents said they would maintain the size of hedge fund investments, 18% would raise their investment level and 13% would reduce their hedge fund target, according to data from the EY 2017 Global Hedge Fund and Investor Survey, released Tuesday.

More investors are investing now or intend to invest within two years in customized hedge fund portfolios, according to the results of the survey of 55 institutional investors, conducted between July and September.

For example, 62% of 2017 survey respondents said they invest or will invest in hedge funds with customized fees and liquidity terms, compared to 48% in 2016. About 40% of institutions said they do or will invest in custom strategy hedge funds, compared to 20% the prior year. The number of investors that invest or plan to invest in hedge funds with customized reporting and/or transparency fell by 1 percentage point to 40% in 2017 compared to the year before.

More than half of survey respondents — 54% — said they expect the total expense ratio for hedge funds (the combination of management and performance fees) to decline, while 41% said they expect fees to remain the same. Just 5% of institutional fund executives said they think hedge fund fees will rise.