83% of managers believe institutions will increase their allocation to hedge funds over the next two years | Paragon Alpha

83% of managers believe institutions will increase their allocation to hedge funds over the next two years

By Matea Gucec

Hedge funds are expected to be well-liked by investors in the second half of 2022 as both the public and private markets begin a time of turmoil and drawdowns, as the recession and geopolitical unpredictability all work to the industry's benefit.

The study is included in the most recent Performance Insight Report, H1 Update: Hedge Funds Navigate Economic Turbulence in 2022.

Managers anticipate that hedge fund methods will produce absolute returns, reduce risk, and provide a solution for portfolio diversification, making them desirable in volatile markets.

Investors who don't currently have a hedge fund allocation are eager to discuss revisiting this in their portfolios.

Sector equities (26%) global macro (22%), credit long/short (22%), and multi-strategy (17%) are the strategies that are predicted to be the most popular with investors in 2022, according to a survey by Barclays Strategic Consulting.

Over the coming months, market volatility and inflation will need to be combated with the help of CTAs and diversifiers (neutral beta and neutral markets), and trend followers are effective in this regard.

Hedge funds are being given the chance to "do what they're meant to do," according to Duncan Moir, senior investment director at Aberdeen, and some investors may support riskier allocations.

According to AIMA data, family offices (68%) and endowments and foundations (55%) are the main drivers of this type of interest.

An average institution with a $5 billion endowment and a 10% allocation to hedge funds earns approximately $240 million more over five years than an endowment with no allocation to hedge funds, according to a recent analysis from Managed Funds Association.


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