Investor redemptions may be a key theme in the hedge fund sector this year, as twice as many investors intend to reduce their exposure as are looking to increase it, alternatives data provider Preqin reported this week.
“Preqin’s interviews with investors at the end of 2016 indicate that the fundraising challenges of the past year show little sign of abating in 2017,” Amy Bensted, Preqin’s head of hedge fund products, said in a statement.
Some strategies face greater redemption risk than others. Commodity trading advisors, the darling of investors last year, turned in a disappointing performance and may be especially vulnerable.
Preqin based its report on a survey of some 150 active hedge fund investors.
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The survey showed that two out of three investors surveyed reported that their hedge fund portfolios had not lived up to expectations in 2016.
This was not true of all strategies. Three-quarters of emerging markets funds met investors’ expectations, as did more than two-thirds of credit strategies.
In contrast, 73% of discretionary CTA holdings and 53% of systematic ones failed to meet expectations. The Preqin All-Strategies CTA benchmark returned just 0.9% in 2016.