JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC

Institutional investors’ top objectives for hedge fund allocations

How do investors measure hedge fund performance?

65%of the hedge fund industry’s assets under management are from institutional investors.

• RISK-ADJUSTED RETURNS THAT ARE NOT CORRELATED TO EQUITY MARKETS

• TO REDUCE VOLATILITY WITHIN A PORTFOLIO

• TO MITIGATE RISKS IN OTHER AREAS OF THEIR

INVESTMENT PORTFOLIO

CORPORATE AND PUBLIC

PENSION PLANS

UNIVERSITY ENDOWMENTS

CHARITABLE FOUNDATIONS

MEASURING HEDGEFUND PERFORMANCEInvestors Weigh In

I N S T I T U T I O N A L I N V E S T O R S I N C L U D E :

67% OF INSTITUTIONAL INVESTORS SEEK ANNUALIZED HEDGE FUND

RETURNS BETWEEN 4%-6%

80% believe that their portfolio risk would increase if hedge funds were removed from their portfolios.

I N F A C T

Each hedge fund employs a unique strategy and trading style.Similarly, each investor partners with a hedge fund to achieve a unique goal within their investment portfolio.

BUT, THE MAJORITY OF INVESTORS

VIEW THESE BROADER COMPARISONS AS

IRRELEVANT, DEVELOPING SEPARATE, MORE

ACCURATE MEASUREMENTS TO DETERMINE IF

HEDGE FUNDS ARE MEETING THEIR GOALS.

36%29%

of investors use separate benchmarks to

measure separate hedge fund strategies

use a single benchmark to measure

their entire hedge fund portfolio

24% of investors believe the S&P 500 and

other public indices are no longer

relevant to hedge fund performance

OBSERVERS OUTSIDE THE INDUSTRY FREQUENTLY COMPARE

HEDGE FUND PERFORMANCE TO BROADER, UNRELATED

MEASUREMENTS LIKE THE PERFORMANCE OF THE S&P 500 INDEX.

How do Hedge Funds Size Up?OF INSTITUTIONAL INVESTORS

FEEL THAT OVER THE PAST 12

MONTHS THEIR HEDGE FUND

ALLOCATION RETURN

EXPECTATIONS HAVE BEEN MET

OR EXCEEDED.

OF INSTITUTIONAL INVESTORS

PLAN TO MAINTAIN OR GROW

THEIR HEDGE FUND ALLOCATIONS

OVER THE NEXT 12 MONTHS.

visit managedfunds.org@MFAUpdates

Data source: Preqin Special Report:

The Real Value of Hedge Fund

Investment, June 2014