Half of investors want to spend more on hedge | Finance news

By Nell Mackenzie

LONDON (Reuters) – Half of the worldwide buyers surveyed by Financial institution of America’s prime brokerage division plan to allocate more money to hedge funds this yr, whereas 37% needed no change.

The outcomes represented a 2% uptick in these desirous to spend more on hedge funds from the beginning of 2024, a report by the bank to shoppers confirmed on Friday.

The survey was sourced from responses from 256 companies that oversaw a mixed quantity of over $1 trillion invested in hedge funds.

Traders who would ditch their hedge fund holdings and take their money back thinned to 7% from 12% in 2023, BofA’s 2025 hedge fund outlook report mentioned.

Dissatisfied buyers thought returns ought to have been higher, mentioned the bank. Of those who had been sad, 73%, cited underperformance as their purpose for desirous to redeem money.

Different causes buyers had been sad included when hedge funds modified their investment strategy and when hedge funds simplified, or consolidated their portfolio, the survey mentioned.

Allocators have additionally been nervous that their hedge funds are piling into crowded trade positions the place everybody has the identical thought, mentioned the report. Crowded positions can grow pricey if speculators rush for the exit on the identical time.

Hedge funds growing too massive to nimbly invest with out their trades shifting the market was additionally a prime concern which had elevated from final yr, the report mentioned.

Roughly the identical buyers as final yr harboured issues that hedge funds which mentioned they specialised in a single form of investing truly made money by doing one thing else, or so-called model drift, it mentioned.

Expertise was named as an ongoing concern, as properly.

Smaller hedge funds working below $500 million in property had been a fifth much less more likely to see their buyers go away.

Household workplaces, pension plans and endowment and foundations had been the almost certainly to take all of their money off the desk, quite than partially, mentioned the report.

In 2025, buyers are most all in favour of stock and bond trades and fewer in development followers and systematic funds that play on macroeconomic occasions.

These hedge fund shoppers had been more profitable in bargaining down on charges in comparison with this time final yr.

Round 60% of buyers gained price reductions in comparison with roughly half final yr, and there was a slight uptick to 22% from 17% who acquired more beneficial liquidity phrases, permitting them to buy and promote out of their hedge fund investments with much less of a delay.

(Reporting by Nell Mackenzie; Modifying by Dhara Ranasinghe and David Evans)