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Credit Suisse Releases 2021 Hedge Fund Investor Survey
Key highlights from the 2021 Credit Suisse Hedge Fund Investor Survey:
- Hedge funds are favored asset class to enhance traditional 60 / 40 model – 70% of investors plan to make changes to their portfolio in 2021 due to the current environment of lower bond yields. As investors look to plug their current return gap, they indicated that hedge funds were their favored asset class to enhance the current 60 / 40 model, followed by high-yield credit, equities, and private credit.
- Proliferation of investors employing hedge funds to access private markets – 53% of allocators invest in private markets equity through hedge funds, with family offices and endowments & foundations the most active. There are multiple drivers behind the rise in private markets, including an ample supply of pre-IPO companies and PIPE transactions, access, knowledge, and return potential.
- Capital continues to flow to non-traditional offerings – 61% of allocations over the past 12-18 months were directed to non-traditional structures, principally custom offerings (co-investments and managed accounts), driven by investors' desire to tailor fit specific investment objectives. This shift shows no signs of abating, with investors indicating the portion will increase this year to 64%.
- Strong appetite for equities and APAC – 7 out of the top 10 overall strategies were equity-oriented, with investors favoring healthcare, fundamental, emerging markets, and TMT. From a regional perspective, APAC was the most in-demand region and China the most preferred country.
John Dabbs, Global Co-Head of Prime Services and Co-Head of Americas Equities, said:
"The current rate environment is creating a sense of urgency for investors to identify new sources of returns for their fixed income portfolio. Our survey highlighted that investors are looking to hedge funds in addition to other asset classes in meeting their long-term obligations."
Jaynita Sodhi, Head of Credit Suisse Capital Services Americas, commented:
"Investors indicated continued strong interest in equity-oriented strategies, particularly around sector and regional specialists. We also noticed a large sentiment upswing for discretionary macro and multi-strategy managers. Hedge fund dispersion for firms employing these strategies widened considerably in 2020, highlighting the importance of manager selection in driving portfolio returns."
Joseph Gasparro, Head of Content for Credit Suisse Capital Services Americas, said:
"We've seen an uptick in demand from LPs to access private markets through hedge funds, given a manager's ability to apply the breadth of their public markets investing acumen to private opportunities. Privates also allow managers to engage with next-generation companies that could be disruptive to publicly-traded peers."
About the Respondents
The survey, conducted from December 2020 to mid-February 2021, covered institutional investors on a global basis, including pensions, endowments, foundations, consultants, private banks, family offices, and funds of hedge funds. 55% of responses came from the Americas, while 29% were from EMEA-based investors and 16% were from APAC.