Institutional investors are still putting money into hedge funds, but the pace slowed in 2011 according to the fifth annual survey of institutional hedge funds conducted by SEI and Greenwich Associates. The survey shows that nearly 38% of investors plan to increase their allocations to hedge funds over the next 12 months – versus 54% a year earlier. Overall, however, allocations to hedge funds has been rising steadily among institutions. In 2011 hedge funds represented 16.7% of institutional portfolios versus 12% during the 2008 financial crisis.
The survey also revealed that 26% of institutional investors said their top challenge in hedge fund investing is meeting performance expectations. In fact, this concern outranked all others by a healthy margin. With that in mind, institutions also reported lower average returns over the year. According to the survey, respondents earned an average annualized return of 6.2% in 2011 versus 9.2% in 2010 and a median annualized return of 5.0% versus 8.1% in the previous year.
Download the survey.