Hedge funds were the dominant asset class among alternative investments in 2014 when it came to overall asset growth, according to Preqin.
“CalPERS cutting hedge funds… does not reflect the wider sentiment in the industry.” —Mark O’Hare, PreqinDespite a disappointing year for returns and some high-profile withdrawals from the sector, Preqin’s “2015 Global Alternatives Report” showed that hedge fund industry assets grew by roughly $360 billion during the year.
This accounted for more than half of the $690 billion increase in total assets invested across hedge funds, private equity, venture capital, private real estate, and infrastructure. In total, Preqin estimated $6.91 trillion was invested across these sectors.
“The recent news of CalPERS cutting hedge funds and reducing the number of private equity partnerships within its portfolio does not reflect the wider sentiment in the industry,” said Mark O’Hare, CEO of Preqin.
“From our conversations with investors, the majority of investors remain confident in the ability of alternative assets to help achieve portfolio objectives.”
However, Preqin predicted that investors would continue to scrutinise hedge fund performance and fees during 2015.
O’Hare said more investors were seeking to increase their alternatives allocation than reduce it, but fund managers “face the challenge of how to attract this new capital”.
“Those fund managers that continue to innovate with new products and solutions, as well as listening to investor demands for better alignment of interests and lower fees, may well be winners in 2015,” he added.
More demand from investors has brought problems for some alternative asset classes, however: Managers of unlisted real estate funds have warned of fewer opportunities in their sector as valuations soar, and private equity funds have record amounts of cash to spend as investors have piled in.
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