Investors flock back to hedge funds after ditching laggards

Hedge funds saw the biggest jump in demand among asset classes examined in a Credit Suisse Group report.

Investor interest in hedge funds is back on the upswing.

Hedge funds saw the biggest jump in demand among asset classes examined in a Credit Suisse Group report Tuesday. More allocators plan to boost their exposure to the funds than reduce it this year, it said. That’s a pivot from mid-2016, when more investors intended to make redemptions, according to the survey of 212 investors globally last month representing almost $660 billion invested in the industry.

Continuing the bullish sentiment, 81 percent of investors surveyed said they plan to put at least some money to work in hedge funds over the next six months, compared with 73 percent last year. And 87 percent of those who redeemed capital from managers in the first half expect to reallocate that cash back to hedge funds, according to the Credit Suisse Mid-Year Survey of Hedge Fund Investor Sentiment.

“Last year, investors were disappointed with hedge-fund performance, and a lot of 2016 was spent making sure funds in their portfolio were the best-performing and weeding out ones they weren’t enamored with,” said Robert Leonard, global head of capital services at Credit Suisse. “Having that process behind them, they seem to be looking forward optimistically. Performance has been better and investors feel like they are also getting more constructive fee structures.”

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The $3.1 trillion industry has been beset with controversy in recent years, as managers battled a backlash over charging high fees while producing humdrum returns. Clients yanked more than $70 billion in 2016, the most since the financial crisis, Hedge Fund Research said. Net withdrawals fell to $5.5 billion in the first quarter of 2017.

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