Institutional share growing for hedge funds

Institutional investors accounted for an average of 61% of hedge fund managers' assets under management at the end of 2010, compared with 45% at the end of 2008, according to a new report from Preqin.

Of the 60 hedge fund managers surveyed in January, the funds with more than $10 billion under management had the largest average percentage of institutional assets at 67%, according to the report released Thursday.

The average percentage of institutional assets was 61% for hedge funds managing between $500 million and $9.9 billion; 59% for funds managing between $250 million and $499 million; and 45% for those managing less than $250 million.

About 57% of respondents said that more than half of their assets now are managed for institutional investors, according to the report.

More than half — 56% — of respondents said the amount of money they are getting from pension funds, endowments, foundations and sovereign wealth funds has increased in the past five years. Fifteen percent of respondents said their institutional investor client base held steady over the past five years, while 14% reported a decrease in institutional money and 15% don't have a five-year track record.

“The consensus is clear: Hedge fund managers are witnessing large inflows of capital from institutional investors and are adapting their fund strategies and marketing accordingly,” wrote Amy Bensted, Preqin's manager, hedge fund data, in the report. “Most fund managers are expecting more money from institutional coffers over 2011 and into 2012, suggesting that the proportion of institutional capital in the sector is due to grow even more over the next 18 months.”