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Credit is the fastest growing hedge fund strategy in terms of institutional investor mandates over 2009

by Amy Bensted

  • 23 Nov 2009
  • HF

Nearly twice as many institutional investors state credit as a hedge fund preference this year, compared to October 2008. Preqin currently monitors 191 institutional investors that have an active interest in credit hedge funds.

Funds of hedge funds are a large source of capital for credit hedge fund managers: with their ability to shift quickly into new strategies, funds of funds were the first group of investors to begin allocating to this type of fund. Many multi-manager firms have launched specific credit funds of funds over 2009, including the Paris-based Olympia Capital Management. In addition, many endowments have begun investing directly in credit strategies this year, in order to generate returns from this sector of the market. For example Georgetown University began a search for credit managers in the third quarter of 2009. Credit is still a relatively niche choice of hedge fund for the institutional investor, however it has rapidly grown in popularity throughout 2009 as a result of the opportunities created in the space following the market crisis.

North America and Europe are the largest sources of capital for credit funds, with 88% of the capital invested in the strategy coming from these regions. However, credit funds are becoming more favoured by Asian and Rest of World investors, with 20% of investors based in this region stating it as a strategic preference for 2009 and 2010. There have many credit opportunities created in Asia, as a result of the global financial crisis, and several Asian credit hedge funds have been formed as a result. Consequently many institutions in the region have sought to capitalise on opportunities in their local markets by making investments specifically in credit hedge funds.

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