In the hedge fund industry, the big keep getting bigger — and their ranks keep growing — with the number of funds managing over a $1 billion hitting a new record. The number of investors dedicating over $1 billion to the sector also ticking up.
Despite some institutional investors backing away from the hedge fund space in recent years, the group of investors allocating over $1 billion to the space grew by five members since 2017. Private sector pension funds had the greatest number of new entrants, with 10, according to Preqin’s count. But while the number of investors now allocating $1 billion or more to hedge funds increased to 247, 39% of them decreased their total allocations to hedge funds over the past year.
Investors want stable, or perceived-to-be-stable, funds and those tend to be large ones that are less likely to go out of business, says Stuart Blair, director of research at Canterbury Consulting. At the same time, many clients are open to smaller managers, he adds.
“On the investor sentiment side, we are seeing more interest in the smaller managers and the managers that are in the small- and mid-cap space, be it credit or equity,” he says. “The caveat [is] when it comes to big activists strategies — there’s still the need for the big funds.”
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