For the second straight year, performance was cited by institutional investors as the No. 1 issue facing hedge funds in the coming year. One-third of respondents indicated so, followed by fees (21%), transparency (9%), correlation (8%) and regulation (6%).
Thirty-five percent of institutional investors recently surveyed by Preqin said returns had fallen short of expectations in 2014, up from 16% in 2013.
Despite the wariness of investors, 58% said they will maintain their hedge fund allocations in the next 12 months (from 60% last year). However, the percentage of those saying they will decrease allocations in 2015 doubled to 16%, at the expense of those saying they would increase allocations (26% in 2015 vs. 32% a year earlier).