Transparency, liquidity and risk management have replaced the performance record of a fund as the key consideration of hedge fund investors, according to a recent survey of 50 global institutional investors by Preqin, which also found half of those surveyed intend to maintain their current exposure to hedge funds in the next year.
This result is consistent with the reason most institutional investors stated for investing in hedge funds, which is to increase diversification and improve the risk/return profile of their portfolio, rather than to produce better returns.
The survey also found that 73 per cent of investors said their hedge fund portfolios have either met or exceeded return expectations, which is an increase on the number of positive responses to this question in 2008 (62 per cent).
Further, 66 per cent of the respondents, which were made up of private and public pension funds, endowments, family offices, foundations and insurance companies, said they were confident or very confident in the hedge fund asset class as a means of satisfying their portfolio objectives.
Fees remain a key issue for institutional investors but the survey found they do not specifically set out to invest in funds that charge lower fees, preferring to negotiate fees with funds that exhibit characteristics that are more important to them, such as greater liqudiity and transparency.