Credit Hedge Funds Continue to Attract Institutional Investors

by Amy Bensted

  • 29 Nov 2010
  • HF

Hedge funds employing a credit strategy have continued to attract significant interest from around the globe, with 15.5% of institutional hedge fund investors monitored by Preqin declaring an active interest in this fund category. Although credit as a hedge fund strategy preference ranks relatively low relative to the likes of the traditional long/short equity and macro strategies, it is – for a second year running – the fastest growing strategy in terms of investor mandates over the past year.

Interest in credit hedge funds over the past year, and going into 2011, is highest amongst fund of hedge funds managers, with approximately 29% of this investor type allocating capital to the space. Other prominent investors in credit managers include endowments and insurance companies, both with 15% of hedge fund investors within each respective category investing in credit hedge fund managers. Direct investment in credit funds is the preferred method across the board when considering all investor types in each region. Sovereign wealth funds, superannuation schemes and public pension funds are other groups of large investors in the sector. Examples of investors actively pursuing further investments in credit funds include the $6.1 billion Arizona Public Safety Personnel Retirement System and the $432 million Davidson College Endowment.

In terms of sheer volume, investors from North America and Europe are the largest sources of capital for credit funds. However, with over 21% of institutional investors in Asia committing capital to these types of funds, this is the region in which credit funds are most popular as a proportion of total institutional hedge fund investors in the region.

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