Investors favor allocations to macro, credit funds - Barclays survey
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[February 24, 2023] By
Carolina Mandl
NEW YORK (Reuters) - Investors such as pension funds and family offices
plan to increase allocations to credit and global macro hedge funds in
2023, although their overall appetite for hedge funds is weaker this
year, a survey by Barclays PLC showed on Friday.
The bank interviewed 302 investors, including pension and sovereign
funds, insurance companies, endowments, foundations and family offices
with $7.5 trillion in assets under management. The investors were based
in the Americas, Europe, the Middle East and Africa.
"Credit is very much in favor as well as the more diversifying
strategies," said Roark Stahler, U.S. head of strategic consulting at
Barclays. Demand for equity hedge funds, meanwhile, is low, the report
said.
Investment intentions favoring macro hedge funds come after a year in
which that strategy, which trades globally a broad range of assets, such
as bonds, currencies, interest rates, stocks and commodities, posted the
best performance in the industry.
Globally, macro hedge funds had gains of 9% last year, while equities
hedge funds, down 10.2%, were the worst performers, data provider HFR
said.
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Good returns are likely to lure fresh money to macro funds this year, as
28% of investors intend to add to their current portfolios, the Barclays
survey found.
Increased allocation to credit hedge funds has appeared as a new trend,
and 34% of surveyed investors also intend to put more money into
distressed funds - those that buy bonds of firms that are failing to pay
debts.
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A branch of Barclays Bank is seen, in
London, Britain, February 23, 2022. REUTERS/Peter Nicholls
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The survey also showed that, although investors still plan to
increase allocations to hedge funds, their intention has decrease
roughly 10% from last year, to 19% of the investors surveyed.
Big investors, such as pension and sovereign funds, insurance
companies, endowments and foundations, are planning to roughly
maintain or even trim their hedge fund exposures in 2023, while more
private banks and family offices see room for additional
allocations.
The survey showed the main reason for a meager appetite for hedge
funds, mentioned by 56% of investors, was a need to rebalance
portfolios after a rough year for stocks. The next major reason was
poor portfolio manager performance, cited by 31%, the survey showed.
Overall, hedge funds lost 4.2% last year, but they still
outperformed the S&P 500, which sank roughly 20%. That left hedge
funds accounting for a bigger portion of portfolios, exceeding
limits set by investment committees. To rebalance, some investors
are forced to divest.
"There's capital outflows as a result of that - hedge funds being a
victim of their own success," said Stahler.
(Reporting by Carolina Mandl; Editing by Bradley Perrett)
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