Investors expect hedge funds to raise $200bn this year
Investors anticipate a record-beating net inflow of $200bn (€130m) into hedge funds in 2008 despite the fact that fundraising in the first three months was at one of its lowest levels for years.
Investors with $4.5 trillion of assets told Deutsche Bank's capital raising group, on average, that they expected another $200bn of assets to flow into hedge funds this year. This would beat last year's record of $195bn and come well ahead of the $126bn raised in 2006 and $99bn raised in 2002, the previous record years, according to US data provider Hedge Fund Research.
Deutsche Bank said investors were aware that the net inflow into hedge funds in the first three months of this year, at $16.5bn, was the lowest net inflow of any first three months in four years. Deutsche Bank also said investors' optimism about the hedge fund market was "at odds with their generally bearish economic outlook". The bank's survey said only 7% of investors felt bullish for 2008, while 80% said they felt bearish.
The bank estimated that $75bn of cash was sitting on the sidelines, waiting for a good opportunity to be invested. It said: "Over 30% of investors are holding cash, and most commonly at levels somewhere between 5% and 10% of their own hedge fund portfolios.
"While we have seen investors take a 'wait and see' approach to the hedge fund market over the last two quarters, 53% of investors holding cash now plan to eliminate their cash holdings by March 2009. This would suggest a renewed willingness to make allocations to hedge funds."
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