Institutional investors will continue to be major players in new assets moving into hedge funds in 2016, according to the eVestment Hedge Fund Outlook 2016 report, helping to drive an additional $50 billion to $60 billion in assets to the $3.1 trillion hedge fund industry during the year.
The new report looks at 2015 trends, eVestment's proprietary hedge fund research, broad themes across traditional and alternative segments of portfolios, and expectations of future allocations from institutional investors and investment consultants to paint a picture of how the hedge fund industry will grow and evolve during 2016. eVestment is the global leader in institutional investor data and analytics. The company offers one of the most comprehensive databases of institutional asset manager and hedge fund manager information in the world and powerful tools for investors, consultants and investment managers to analyze and act on that data.
Some other interesting points from the report, according to report author and eVestment Vice President and Head of Research Peter Laurelli, include:
The hedge fund industry is, barring the occurrence of an outlier event, in a decent position for another year of growth. Inflows should be supported by the continuing slow and steady reallocation of assets from traditional to alternative strategies. In spite of some high-profile negative hedge fund news during 2015 and underwhelming performance in some segments, other hedge fund segments and individual hedge funds performed well, making hedge funds of interest to institutional investors looking for investment diversity.
Given the expectation among asset owners for a continued shift toward alternatives in 2016, including increases in hedge fund allocations, and the diversity and return potential exhibited among the multi-strategy universe in 2015, we expect multi-strategy fund inflows to continue into 2016. It is doubtful inflows will match 2015, but near the $30 billion level is possible.
Aggregate flows for event driven strategies are also unlikely to rebound significantly in 2016. Many products in the universe offer alternative approaches to extracting value from public and private markets, however the level of uncertainty for continued major equity market gains in 2016, offset by interest in less correlated special situation investing, should result in muted, yet positive net inflows for the universe once overhanging, early year redemption pressures ebb.
Credit strategy fund flows will likely be slightly positive in 2016 as the rash of redemptions peters out in H1 along with limited, but apparent new demand for flexible approaches to an uncertain rate environment.