57% of the 165 investors planning to make their first investments in the next 12 months come from the pension fund arena. These are predominantly public pension fund investors (27.9% of all “considering” investors are public retirement bodies) and private sector funds (26.7%) with the balance being formed from superannuation schemes.
The mean target allocation these investors have set is modest at 3.9% (rising to 4.4% amongst the new pension funds). However, should these new investors initial portfolios prove successful this could potentially increase rapidly; the mean target allocation for current hedge fund investors is 11.9% (8.1% across all pension funds). With the median assets under management of these potential new investors in hedge funds standing at $1.3bn, the possible increase in hedge fund assets in the next year from new investors alone could be a significant $50bn.
58% of these institutional investors planning to make their first allocations to hedge funds are considering doing so through funds of hedge funds. Within the pension fund group this is even higher at 65%. Global macro is the most favoured single strategy considered by these potential investors over the next 12 months; around a fifth of all of the institutions currently looking at hedge funds with an eye specifically on these vehicles.
Preqin tracks 165 institutions which are planning to make their first investments in hedge funds in the next 12 months: 58% of these are in US, 31% in Europe and 11% in Asia and ROW.