European institutional investors reduced their hedge fund-of-funds allocations by nearly 20 percentage points in the second quarter, and the percentage of those whose hedge fund investments are only in funds of funds also fell by the same amount, according to the just-released Institutional Barometer report. Those exclusively in funds of funds dropped to 57.5% from 76% in the first quarter. Those investors solely in single-manager hedge funds increased 7% to 11% of investors surveyed. The balance of investors - 31.5% - invest in a combination of single-manager hedge funds and hedge funds of funds.
Also, institutional investors who would prefer to invest in single-strategy hedge funds leaped to 29% from 18%. There was also a doubling of expressed preference for investment in single-strategy hedge funds of funds, to 8% in the second quarter, compared with the first quarter. Those executives who said they had no preference about the kind of hedge fund of funds in which they invested was 42%, compared with 41% in the first quarter, and those who preferred to invest in diversified hedge funds of funds remained the same at 19%. Investors who said they preferred to invest in capital guaranteed hedge funds dropped to 2%, from 19%.
Investor Source, a research firm, and law firm Clifford Chance surveyed 160 institutional investors throughout Europe about their hedge fund investments.