By Nell Mackenzie
LONDON (Reuters) – Half of the worldwide buyers surveyed by Financial institution of America’s prime brokerage division plan to allocate more cash to hedge funds this 12 months, whereas 37% needed no change.
The outcomes represented a 2% uptick in these desirous to spend extra on hedge funds from the beginning of 2024, a report by the financial institution to shoppers confirmed on Friday.
The survey was sourced from responses from 256 corporations that oversaw a mixed quantity of over $1 trillion invested in hedge funds.
Buyers who would ditch their hedge fund holdings and take their a refund thinned to 7% from 12% in 2023, BofA’s 2025 hedge fund outlook report mentioned.
Dissatisfied buyers thought returns ought to have been higher, mentioned the financial institution. Of people who have been sad, 73%, cited underperformance as their purpose for desirous to redeem cash.
Different causes buyers have been sad included when hedge funds modified their funding technique and when hedge funds simplified, or consolidated their portfolio, the survey mentioned.
Allocators have additionally been nervous that their hedge funds are piling into crowded commerce positions the place everybody has the identical concept, mentioned the report. Crowded positions can develop pricey if speculators rush for the exit on the identical time.
Hedge funds rising too massive to nimbly make investments with out their trades shifting the market was additionally a prime concern which had elevated from final 12 months, the report mentioned.
Roughly the identical buyers as final 12 months harboured considerations that hedge funds which mentioned they specialised in a single sort of investing truly made cash by doing one thing else, or so-called type drift, it mentioned.
Expertise was named as an ongoing concern, as nicely.
Smaller hedge funds working underneath $500 million in belongings have been a fifth much less prone to see their buyers depart.
Household places of work, pension plans and endowment and foundations have been the most definitely to take all of their cash off the desk, somewhat than partially, mentioned the report.
In 2025, buyers are most concerned about inventory and bond trades and fewer in development followers and systematic funds that play on macroeconomic occasions.
These hedge fund shoppers have been extra profitable in bargaining down on charges in comparison with this time final 12 months.
Round 60% of buyers gained charge reductions in comparison with roughly half final 12 months, and there was a slight uptick to 22% from 17% who received extra beneficial liquidity phrases, permitting them to purchase and promote out of their hedge fund investments with much less of a delay.
(Reporting by Nell Mackenzie; Modifying by Dhara Ranasinghe and David Evans)
