Key Takeaways
- • Hedge fund industry assets under management are projected to grow by approximately $250 billion within one year, reaching beyond $3.1 trillion by summer 2016, according to Agecroft Partners' forecast based on investor feedback.
- • Second quarter 2015 hedge fund inflows reached the second-strongest quarterly intake since Q3 2009, demonstrating resilience despite persistent underperformance versus the S&P 500 index and recent industry headwinds including insider trading scandals and fee criticisms.
- • Institutional investor conviction remains strong: 93% of institutional investors surveyed by Credit Suisse Capital indicated intentions to increase or maintain hedge fund allocations in the second half of 2015.
- • Pension fund community diverged from CalPERS' 2015 divestment announcement, with many funds increasing rather than decreasing hedge fund allocations, signaling institutional confidence in the asset class despite high-profile exits.
- • Asset growth persists despite sustained criticism regarding hedge fund performance relative to equity indices, elevated fee structures, and regulatory scrutiny, reflecting underlying institutional demand for alternative strategies.
Summary
The hedge fund industry is positioned for substantial asset growth over the next twelve months, with Agecroft Partners, a third-party hedge fund marketing firm, projecting an increase of approximately $250 billion in assets under management by summer 2016. This expansion occurs within a broader context of investor skepticism toward hedge fund returns and industry structure.
According to Don Steinbrugge, managing director at Agecroft Partners, the sector has weathered considerable negative publicity over recent years, including insider trading scandals, persistent criticism of fee structures, and documented underperformance relative to the S&P 500 index. Additionally, the California Public Employees' Retirement System (CalPERS) announced significant divestment from hedge funds during this period. Despite these headwinds, capital continues flowing into the sector. Agecroft's projection is grounded in direct feedback from thousands of hedge fund investors across institutional and other investor categories.
Supporting this growth trajectory, eVestment reported that second quarter 2015 hedge fund inflows represented the second-strongest quarterly inflows since the third quarter of 2009, bringing total industry assets to a record $3.1 trillion. This data demonstrates sustained institutional appetite for hedge fund exposure. Furthermore, a Credit Suisse Capital survey revealed that 93% of institutional investors surveyed indicated intentions to either increase or maintain their hedge fund allocations throughout the second half of 2015.
The institutional investor response to CalPERS' divestment announcement proved notably different from historical precedent. Rather than triggering a cascade of pension fund exits, the broader pension fund community either maintained existing positions or increased allocations to hedge funds. This divergence underscores continued institutional confidence in hedge funds as portfolio components despite high-profile regulatory concerns and performance comparisons.
According to Don Steinbrugge, managing director at Agecroft Partners, the sector has weathered considerable negative publicity over recent years, including insider trading scandals, persistent criticism of fee structures, and documented underperformance relative to the S&P 500 index. Additionally, the California Public Employees' Retirement System (CalPERS) announced significant divestment from hedge funds during this period. Despite these headwinds, capital continues flowing into the sector. Agecroft's projection is grounded in direct feedback from thousands of hedge fund investors across institutional and other investor categories.
Supporting this growth trajectory, eVestment reported that second quarter 2015 hedge fund inflows represented the second-strongest quarterly inflows since the third quarter of 2009, bringing total industry assets to a record $3.1 trillion. This data demonstrates sustained institutional appetite for hedge fund exposure. Furthermore, a Credit Suisse Capital survey revealed that 93% of institutional investors surveyed indicated intentions to either increase or maintain their hedge fund allocations throughout the second half of 2015.
The institutional investor response to CalPERS' divestment announcement proved notably different from historical precedent. Rather than triggering a cascade of pension fund exits, the broader pension fund community either maintained existing positions or increased allocations to hedge funds. This divergence underscores continued institutional confidence in hedge funds as portfolio components despite high-profile regulatory concerns and performance comparisons.
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