Nearly half (45 per cent) of global institutional investors reported that their hedge fund portfolios had reached or exceeded expectations as of June 2017, compared to just 21 per cent that said the same at the mid-year mark in 2016, according to new research by Preqin Ltd.
As such, the majority of investors now hold either a positive (18 per cent) or neutral (36 per cent) view of hedge funds. A third (33 per cent) expect performance to advance over the coming 12 months, and 22 per cent intend to increase their allocation to the asset class.
Read: Hedge funds continue trend of positive returns in May
However, 49 per cent of institutional investors plan to reduce their allocation to the funds, according to the survey. Indeed, 33 per cent have lost confidence in hedge funds’ ability to meet their expectations during the last 12 months.
“Although the majority are still dissatisfied with the performance of their portfolios, a significant proportion have softened their stance in light of the consistent gains the industry has made in the past 12 months,” said Amy Bensted, head of hedge fund products at Preqin. “However, despite a double-digit 12-month return, and an improvement in investors’ outlook on industry performance over the next year, the long-term performance of hedge funds is still being questioned.”
On a more long-term basis, the majority (70 per cent) of respondents said hedge funds have failed to meet their expectations over the past three years. However, only six per cent believe hedge funds will perform worse than they have over the next 12 months.
Read: Have institutional investors lost faith in hedge funds?