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Hedge Funds

50% of hedge fund allocators expect to hike investments in 2018 – Deutsche Bank survey

Half of allocators expect to increase their investments in hedge funds in 2018, showed a survey released Thursday by Deutsche Bank's prime brokerage unit.

Of those surveyed, 39% said they will maintain their current allocation to hedge funds and 11% said they will reduce it this year.

In 2017, by contrast, 37% of survey respondents said they intended to grow their hedge fund portfolios, 41% said they would hold to their status quo and the remainder said they would cut back their allocation.

By investor type, survey respondents said their hedge fund actions in 2018 will be:

  • Pension fund officials: 56% intend to increase hedge fund investments, 29% plan no changes and 15% will decrease the size of their portfolio.
  • Endowment and foundation chief investment officers: 37% intend to increase hedge fund investments, 54% will not make changes and 9% will cut back their hedge fund portfolios.
  • Insurance company investment managers: 36% will top up their hedge fund portfolio, 43% will keep investment at the same level and 21% will lower their investments.

Data from Deutsche Bank's 16th annual Alternative Investment Survey found that across all investor types, the average hedge management fee is 1.56%, down from 1.59% a year ago. Corporate and public pension funds pay the lowest average management fees of all investor types surveyed at 1.38% and 1.47%, respectively.

Average hedge fund performance fees also have dropped to 17.43% in 2018, compared to 17.69% the previous year. Corporate pension funds are charged the lowest fee — 16.25% — on average, followed by investment consultants, which pay an average 16.35% incentive fee.

Deutsche Bank surveyed 436 global hedge fund allocators in December. The survey universe breakdown was hedge funds-of-funds managers, 40%; investment consultants, 28%; pension funds, 14%; private banks/wealth managers, 10%; family offices, 3%; endowments/foundations, 3%; and insurance companies, 2%.