Institutional Investors Targeting Event Driven Hedge Funds

by Graeme Terry

  • 20 Feb 2012
  • HF

Preqin’s Hedge Fund Investor Profiles database currently contains 713 profiles for institutional investors that indicate a preference for event driven hedge funds. Of these investors, 62% are based in North America, 29% are based in Europe and 9% are based in Rest of World. Event driven is currently the fourth most popular hedge fund strategy on the Preqin database behind long/short equity, multi-strategy and macro.

Event Driven strategies remain popular with institutional investors due to the potential to offer less market driven returns. Such strategies are perceived as higher risk which means that they are typically favoured by established investors. Funds of hedge funds are an important source of capital for event driven managers due to their experience and flexibility and 46% of fund of funds on the Preqin database indicate event driven as a strategy preference. Meridian Capital Partners is an example of such a manager and the group may consider further allocations to this strategy in 2012. Other groups of institutional investor with a strong demand for event driven funds include endowments (25% of investors indicate event driven as a strategy preference), foundations (23%), sovereign wealth funds (21%), asset managers (18%) and public pension funds (16%).

Event Driven strategies are tipped to perform well in 2012 and as a result there may be increased allocations to this strategy from institutional investors. The strategy has already seen increased allocations from institutional investors in recent years with 22% of all investors on the Preqin database currently indicating this as a preference, compared to 13% of investors in 2010. Samba Financial Group is an example of an investor planning to focus on event driven hedge funds over the coming 12 months. Many investors believe that more opportunities will emerge for event-driven hedge funds due to the prospect of gradual recovery in developed economies.

Overall there remains a strong appetite for event driven hedge funds and this has been one of the fastest growing strategies amongst institutional investors in recent years. With investors looking to increase their hedge fund allocations in 2012, there is the potential for event driven fund managers to continue attracting significant capital from the institutional universe.

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