Despite an extremely bearish outlook on the global economy, investors plan to move more than $200 billion into hedge funds this year, according to the sixth annual Alternative Investment Survey conducted by Deutsche Banks hedge fund capital group.
About 1,000 respondents from 500 firms were surveyed about their hedge fund investments and intentions. Eighty percent of those surveyed said they were bearish about economic prospects in 2008, though their outlook improved markedly for 2009 with 40% expressing optimism about a recovery. Only 7% of respondents were bullish about the global economic outlook in 2008 while 13% said they were unsure. As for 2009, 23% of those surveyed said theyre bearish and 37% expressed uncertainty.
The uncertainty about market results, however, didnt dampen investor predictions about hedge fund performance this year. Investors expect hedge funds to return a collective 7.5% in 2008 while they think their own hedge fund portfolios will come in at 10% for the year (percentages represent the median of responses).
Leading that collective performance will be macro hedge fund strategies, according to the predictions of 61% of the survey universe, followed by distressed (41%) and equity volatility funds (37%). Asset-backed securities funds were predicted to be the rock-bottom performer by 38% of those surveyed.
By region, about 45% of investors surveyed said they think funds investing in the Middle East and North Africa will be the top performers in 2008, followed by Latin America (about 28%) and Russia (about 26%). Investors predicted that hedge funds investing in the United States/Canada and Western Europe would be the worst performing this year.
Hedge fund investors prediction that the Middle East and North Africa will be the top performing region in 2008 indicates a clear redistribution of capital toward emerging markets, said Sean Capstick, managing director and co-head of Deutsche Banks hedge fund capital group, in a news release accompanying the report.
(To read the entire report, click here.)