Family offices allocated about 21% of their portfolios to hedge funds in 2012, but their enthusiasm for these alternative investments has ebbed, according to a new survey from Infovest21.
The survey of single- and multiple-family offices and foundations found that hedge funds received the second-largest asset allocation behind equities.
However, investors’ allocations were down from an average of 26% in 2011 and 32% in 2010. Moreover, hedge funds’ favorability ratings plummeted to 22% in 2012 from 64% last year.
Allocations to funds of hedge funds increased to 2.9% from 1% last year, but were considerably off the 9% allocation in 2010.
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Infovest21 interviewed primarily U.S.-based groups with an average asset size of $1.6 billion during July and August. Twenty-six percent of respondents had been investing in hedge funds and funds of funds for more than two decades.
Investors said they selected managers based primarily on their integrity, performance and edge in investment process, according to the study. Respondents invested in 19 hedge fund managers on average in 2012, compared with 23 in 2011.