Data highlighted in the 2014 Preqin Global Hedge Fund Report shows that family offices are the investor type which saw the largest increase in hedge fund allocation over the course of 2013. Between December 2012 and December 2013 these investors increased their mean hedge fund allocation from 16.6% of total assets to 19.5%. This continues a trend of increased hedge fund allocations from family offices, with the average allocation also increasing from 14.9% in December 2011.
The resurgence in interest in hedge funds from family offices is most likely fuelled by the growing confidence of investors in hedge funds to meet portfolio objectives. This looks set to continue, with 2014 already showing further interest in hedge funds from family offices, coinciding with a general resurrection of interest in the asset class among institutional investors. One family office searching for new hedge fund investments is Semper, a large Swiss family office, which is looking to add to its range of UCITS-compliant hedge funds running global macro and long/short equity strategies.
With regard to the strategies that family offices are gaining exposure to, Preqin’s Hedge Fund Investor Profiles online service shows that long/short equity is the most favoured investment approach, with 49% of family offices having an interest in the strategy, followed by macro strategies (32%). Long/short equity is also the strategy being targeted most in 2014; 42% of those family offices which are targeting new hedge fund investments in 2014 are looking to invest in long/short equity funds. Family offices typically favour direct investments over funds of hedge funds, with 68% of family offices tracked by Preqin investing in hedge funds solely through single manager structures.
The increase in investor appetite for hedge funds across all investor types in 2013 is strong evidence of the growing confidence investors have in the asset class. As a result, 2014 looks set to present opportunities for hedge fund managers looking to raise funds, and family offices, in particular, are likely to be an important source of capital for these managers in 2014.