With assets managed by hedge funds expected to grow beyond
The mixed performance of global markets from the start of 2014 has created numerous and varying opportunities for hedge fund investment managers. The uniquely nuanced landscape of capital markets forecast for the remainder of this year has led many key industry participants to surmise that 2014 will be the year of the hedge fund.
Indiscriminate gains throughout 2013 across global equity markets have heralded a phase shift as the world economy continues to strengthen. Consequently, we have seen expansions of institutional investor mandates into the alternative investment sector — with particular growth in demand for hedge fund investments being recorded for 2014 to date. Driven by significant inflows, mostly stemming from 'smart money' allocations from institutional investors, hedge funds are forecast to grow at an accelerating pace to reach a record level of
Institutional investors are forecast to reinforce their commitments to hedge funds — with 57 per cent planning to grow their allocations in 2014 according to an in depth survey recently administered by
Equity long-short and risk-based strategies are the most sought after at present; 39 per cent of investors are now embracing a risk-adjusted approach to asset allocation, up from 25 per cent in 2013. Risk-based approaches allow for the effective removal of historical constraints on the allocation to absolute return strategies, allowing equity long-short managers to compete with long-only and fixed income absolute return funds within the overall risk budget.
In the post-recession climate, investors are increasingly discerning and are seeking the best managers for their capital. Many are steering flows into hedge funds that are uncorrelated to global benchmarks — perceived as able to generate excess returns as other markets suffer downturns. Allocations from the
Hedge funds have drawn capital from across the Gulf region as a result of a combination of interrelated factors. Within the
"We are expecting the upgrade of the
On a broader scale, the
The financial services industry has grown rapidly in the Gulf region over the past five years and interest from investors is growing at an intensifying pace. The favourable climate in the Gulf region suggests that it is poised to further establish itself as a global financial centre as the year unfolds. Since its 2004 inception, the
Further inciting growth in the Gulf hedge fund industry will be proposed regulatory changes. As a key growth area for the region, the positive impact of the financial services industry to the wider economy is attracting increasing regulatory and government attention.
Overall we can expect to see a continuation of these trends — with economic fundamentals and market conditions forecasted to strengthen in the GCC region and investors worldwide continuing to seek out hedge funds for their investment allocation.
The writer is a risk officer at
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