Family offices are to lead the way in new allocations to hedge funds this year, according to a new report. Picking up the Pieces, commissioned by Barclays Capital, estimates that the hedge fund industry will see at least $50 billion of new capital flow into its coffers.
The report, based on interviews with approximately 300 investors and 100 hedge fund managers, representing $700 billion of hedge fund industry assets, names family offices and pension funds as key drivers.
Those surveyed reported holding an average of 14% of their
portfolios in cash, which nearly 80% plan to reallocate during 2009. The Merrill Lynch/Campden Research European Single Family Office Survey, released earlier this year, reported that SFOs in Europe had 26% of their portfolios in cash or equivalent.
"We found that in spite of dramatic changes in the investor landscape, certain investors were ready to deploy their cash balances aggressively once markets stabilised," said Brian Reilly, Managing Director of BarCap. "Managers who develop early relationships with new investors will be the primary beneficiaries of this trend."
Hedge fund managers expect redemption requests to fall to 10% of their AUM in 2009 from fourth quarter 2008 highs of 25%, while managers will be encouraged to embrace creative structures to promote transparency and better align incentives.