Nearly half of institutional investors, 46%, are willing to invest in young and/or small hedge funds and 15% would consider such an investment, according to a survey by database manager Preqin Hedge. If the new hedge fund had come from a well-established firm, the percentage of those who would invest rose to 55% and those who would consider doing so increased to 12%. Only 8% of survey respondents said they would seed a new hedge fund, but 12% said they would consider it.
Endowment officials are the most inclined to invest with emerging hedge fund managers, according to the survey; 64% of them would invest in an emerging hedge fund, followed by 60% of public pension plan officials, 50% of family offices and 30% of insurers. By contrast, only 14% of corporate pension plan officials said they would invest in an emerging hedge fund.
Preqin Hedge analysts found that the length of hedge fund track records was important to the institutional investors surveyed, with 34% requiring a minimum track record of between one and two years, 33% requiring between three and four years and 24% insisting on at least five years of experience. The size of hedge funds also mattered to respondents: 33% required assets of at least $500 million and 11% required at least $1 billion under management before they would invest.
The survey of 50 institutional investors was conducted earlier this month.