Pension funds to increase weight of hedge fund exposure, says Barclays Capital

Hedge funds are likely to receive $50 billion in new investments by the end of 2009, according to a Barclays Capital Prime Services report. Pension funds are likely to increase their hedge fund allocations this year as will family offices, while insurers, private banks, endowments and foundations are expected to decrease their exposure, according to Barclay’s “Picking Up the Pieces” report, which is based on a survey of investors and hedge fund managers.

The average hedge fund allocation among all investors was 2.4% at the end of 2008, down slightly from 2.6% at the end of 2007, according to the report. North American endowments and foundations were the biggest hedge fund investors, with an average allocation in 2008 of 14%.
U.S. pension funds had invested the most — $306 billion — in hedge funds last year, followed by U.S. banks, $216 billion, and European private banks, $177 billion.

Hedge fund managers predicted that redemption requests will drop to 10% of their assets under management in 2009, from 25% as of Dec. 31

Survey respondents predicted that global hedge fund assets will rise $100 billion to total $1.3 trillion by the end of this year, up from $1.2 trillion as of midyear 2009.

“We found that in spite of dramatic changes in the investor landscape, certain investors were ready to deploy their cash balances aggressively once markets stabilized,” said Brian Reilly, managing director, in a news release accompanying the report.

The Barclays Capital report is based on data from 300 investors and 100 hedge fund managers, representing $700 billion in assets, approximately half that of the entire hedge fund industry. The report data used data from December 2008 to March 2009.

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