Hedge fund assets are expected to reach a record of almost $3 trillion by the end of 2014, up from $2.6 trillion as of Dec. 31, 2013, Deutsche Bank's 12th annual alternative investor survey released Tuesday shows.
The estimate is based on investors' predictions of $171 billion net inflows to hedge funds and performance-related gains of 7.3%, representing $191 billion.
Nearly half the institutional investors surveyed increased their hedge fund allocations in 2013, and 57% plan to increase their allocations in 2014.
Some 80% of survey respondents indicated that hedge funds performed better or as expected in 2013; 63% are targeting a return of 9.4% in 2014. Equity long/short and event-driven are the most-sought-after strategies.
Investors pay an average management fee of 1.7%, and an average performance fee of 18.2%.
Thirty-nine percent of investors expect to adopt a risk-based asset allocation this year, up from 25% in 2013. Some 41% of pension consultants recommend a risk-based asset allocation approach to clients.
More than 400 investor entities, representing more than $1.8 trillion in hedge fund assets, responded to the survey conducted by Deutsche Bank's global prime finance business. Respondents include executives at asset management firms, public and private pension plans, endowments and foundations, insurance companies, funds of funds, private banks, investment consultants and family offices.
