Global macro trend is your friend, alternative investors say

The hedge fund industry did not wither and die during the 2008 market collapse and great liquidity crunch.  Despite calls to the contrary, there are still thousands of hedge funds and funds of hedge funds out there, focused on producing decent returns in ways that other types of investment managers simply cannot.

Which brings us to a bit of good news about the state of the hedge fund industry: Investors were already putting money back into both hedge funds and funds of hedge funds in the final quarter of 2009, according to to the latest quarterly survey by Brighton House Associates, released earlier this month. The even better news for hedge fund industry participants: They were putting money into strategies that they felt would be good long-term bets rather than just a way to recover their 2008 losses.

The report, which surveys more than 1300 alternative investment managers every quarter, has become a useful snapshot of what investors are thinking and where their intentions lie in terms of alternative investment allocations.  And the latest report was certainly no let-down.

According to the results global macro and commodities were among the top strategy picks of investors in the final three months of last year – a sign that investors are looking for hedge fund managers focused on trends related to the global economic recovery – and not just any recovery. (see chart highlighting investor strategy interests below.)

Source: Brighton House Associates

Funds taking advantage of opportunities in the secondaries space were also of interest to investors, according to the survey results, as were funds of hedge of funds, which after suffering from additional outflows through the first half of last year finally began to level off and recover.  Of those investors interested in funds of hedge funds, the family office set proved the most keen -a reflection of the sobering post-crisis reality that trying to build a portfolio of managers and strategies on your own is not only difficult and costly but also potentially hazardous.

Source: Brighton House Associates

Real estate funds also benefited from a fourth-quarter market rebound, especially in the US and Europe where investors were interested in sourcing fund opportunities in commercial real estate, according to the survey. Interest in CTA / managed futures funds of funds also gained traction, thanks in large part to rising prices for gold and other commodities. Investors even expressed interest in private equity funds, particularly those focused on buyout opportunities.

Source: Brighton House Associates

And in all the talk about increased investor interest, rising inflows and diversification into various alternatives strategies, the bad news?

There isn’t any, according to the report.

“Early indications for 2010 are that the loosening of credit is finally beginning to have a significant impact on the alternative investment community as capital is beginning to flow back into the industry following the redemptions sparked by the crisis in 2008.”

Let’s all hope so.

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