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Institutional Investment in Hedge Funds: Evolving Investor Portfolio Construction Drives Product Convergence
To understand the industry dynamics, we conducted 73
in-depth, one-on-one interviews with an array of institutional
investors (chief hedge fund allocator), hedge fund managers
(COO/CFO and marketing leads), large asset managers (head
of product development and business strategy), consultants
(head of the hedge fund or alternatives practice area) and fund
of fund managers. Taken all together, our survey participants
represented $821 billion in assets either allocated, managed
or under advisement in the hedge fund industry.
Our survey interviews were not constructed to provide one-
dimensional responses to multiple choice questionnaires, but
were instead free-flowing discussions. We collected more
than 80 hours of dialog and used this material to spur internal
analysis and create a holistic view of major themes and
developments. This type of survey is a point-in-time review
of how investor allocation theory is evolving, and how hedge
funds and asset managers are in turn looking to advance their
product offerings.
This report is not intended to be an exact forecast of where
the industry will go, but we did construct the paper around
the comments and views of the participants, so many of the
themes are forward looking. We have also built indicative
models based on those views to illustrate how asset flows and
opportunity pools may develop in the near future.
The structure and presentation of the report is intended to
reflect the voice of the client and is our interpretation of their
valued feedback. To highlight key points, we have included
many quotes from our interviews but have done so on a
generic basis, as participation in the survey was done on a
strictly confidential basis and we do not identify which firms
or individuals contributed to the report.
There are a few topics that this survey has touched upon that
have been covered in more detail by other recent publications
from Citi Prime Finance. In those cases we have referenced
the source, and where it touches on broader adjacent
trends we have noted it but tried to stay on topic for the
subject at hand. The following chart shows the survey
participants that we interviewed this year, representing all
major global markets.
Methodology
Participant Profile
The 2012 Citi Prime Finance annual research report is the synthesis of views collected across a broad set
of industry leaders involved in the hedge fund and traditional long-only asset management space. In-depth
interviews were conducted with hedge fund managers, asset managers, consultants, fund of funds, pension
funds, sovereign wealth funds, and endowments and foundations.
HF AuM
$383,445
Survey Participants
Investor Participant
AuM (Millions of Dollars)
Asset Manager Participant
AuM (Millions of Dollars)
Hedge Fund Participant
AuM (Millions of Dollars)
Consultant Participant
AuA (Millions of Dollars)
Hedge Fund
Managers
40%
Asset
Managers
31%
Investors
15%
Other AUM
$1,538,934
HF AuM
$44,974
Other AUM
$3,147,660
HF AuM
$205,275
Other AUM
$254,582
HF AuM
$187,182
Other AUM
$1,502,910
Consultants
14%