Hedge funds are soaring, thanks to investor interest. Credit Suisse today released its Mid-Year Survey of Hedge Fund Investor Sentiment, entitled “Back In The Saddle”, which polled over 275 institutional investors globally representing $1.04 trillionin hedge fund investments. Participants were surveyed on a number of topics, including key industry trends and forecasts, as well as strategy preferences and allocation plans for the second half of the year.

Joseph Gasparro, who leads Strategic Advisory and Content for Credit Suisse Capital Services, said: “Investors continue to have increased appetite for hedge funds driven by a variety of factors, including more aligned fees and terms as well as the broader use of customized solutions and non-traditional vehicles, especially Managed Accounts and Co-Investments.”

The key findings from the report are as follows:

  • Investor Appetite for Hedge Funds Remains Strong Hedge Funds witnessed the largest positive swing in net demand among the different asset classes we surveyed and are on par as the top investment strategy of allocators going into the second half of the year.
  • Momentum of Non-Traditional Products Investors continue to show increasing preference for employing alternative investment vehicles in addition to commingled accounts. Most favored structures include Separately Managed Accounts/Funds of One, Co-Investments, Private Credit, and Longer Lock products.
  • Focus on Fund Expenses Allocators indicated more attention should be given to pass through fees. Approximately 25% of investors moved certain fund expenses to the manager over the past two years.
  • Quantifying Alignment of Interests Fees & Terms (76%) and Fund Expenses (51%) are the topics investors are most focused on. With the ongoing dialogue between investors and managers now including more emphasis on pass through fees, quantifying the total cost of running a hedge fund and supporting it with benchmarking could help create an optimal alignment of interests.