Key Takeaways
- • Deutsche Bank's 13th annual Alternative Investment Survey polled 435 hedge fund investors managing over USD 1.8 trillion in AUM, capturing institutional sentiment and 2015 allocation intentions.
- • Hedge fund industry assets are projected to exceed USD 3 trillion by year-end 2015, representing 7% growth, with 39% of institutional investors planning to increase their hedge fund allocations.
- • Asset concentration among mega-managers has accelerated since 2008: firms with more than USD 5 billion AUM grew assets 141% versus 53% growth for sub-USD 5 billion managers; fewer than 200 firms now control two-thirds of industry assets.
- • Institutional allocators are prioritizing relationships with larger hedge fund managers and intermediaries capable of delivering comprehensive portfolio solutions, signaling a structural shift toward scale and operational sophistication.
- • Manager alignment with investors through alpha generation focus and co-investment opportunities emerge as critical competitive differentiators for building durable limited partnership-general partnership partnerships.
Summary
Deutsche Bank released its 13th annual Alternative Investment Survey on March 3, 2015, drawing responses from 435 hedge fund investors representing USD 1.8 trillion in hedge fund assets under management. The survey provides a benchmark view of institutional investor sentiment and capital allocation strategy for the 2015 calendar year, making it one of the industry's longest-running and most comprehensive institutional investor studies.
The survey projects continued industry expansion, with hedge fund assets expected to surpass USD 3 trillion by year-end 2015, marking a 7% increase from the prior year. More significantly, institutional capital flows remain supportive: 39% of surveyed investors indicated plans to increase their hedge fund allocations in 2015, underscoring sustained institutional demand despite a challenging macro environment and performance volatility.
A dominant trend in the data reflects accelerating asset concentration among the largest managers. Since the 2008 financial crisis, hedge fund firms managing more than USD 5 billion in assets have grown their portfolios by 141%, compared to 53% growth for smaller managers with less than USD 5 billion under management. This disparity has crystallized market structure: fewer than 200 hedge fund firms now account for more than two-thirds of total industry assets. Barry Bausano and Murray Roos, co-heads of Global Prime Finance at Deutsche Bank, attributed this consolidation to institutional allocators' evolving preferences. Bausano noted that investors increasingly seek to engage with larger managers and intermediaries capable of delivering "comprehensive portfolio solutions." Roos emphasized that managers demonstrating strong interest alignment, disciplined alpha generation, and willingness to co-invest alongside limited partners will maintain competitive advantage as the industry matures.
The survey results signal a structural reshaping of the hedge fund landscape favoring scale, operational infrastructure, and institutional-grade governance over smaller, specialized boutiques. For sophisticated allocators, the data suggests that 2015 represents a continuation of the post-crisis trend toward concentration of capital among established, larger platforms.
The survey projects continued industry expansion, with hedge fund assets expected to surpass USD 3 trillion by year-end 2015, marking a 7% increase from the prior year. More significantly, institutional capital flows remain supportive: 39% of surveyed investors indicated plans to increase their hedge fund allocations in 2015, underscoring sustained institutional demand despite a challenging macro environment and performance volatility.
A dominant trend in the data reflects accelerating asset concentration among the largest managers. Since the 2008 financial crisis, hedge fund firms managing more than USD 5 billion in assets have grown their portfolios by 141%, compared to 53% growth for smaller managers with less than USD 5 billion under management. This disparity has crystallized market structure: fewer than 200 hedge fund firms now account for more than two-thirds of total industry assets. Barry Bausano and Murray Roos, co-heads of Global Prime Finance at Deutsche Bank, attributed this consolidation to institutional allocators' evolving preferences. Bausano noted that investors increasingly seek to engage with larger managers and intermediaries capable of delivering "comprehensive portfolio solutions." Roos emphasized that managers demonstrating strong interest alignment, disciplined alpha generation, and willingness to co-invest alongside limited partners will maintain competitive advantage as the industry matures.
The survey results signal a structural reshaping of the hedge fund landscape favoring scale, operational infrastructure, and institutional-grade governance over smaller, specialized boutiques. For sophisticated allocators, the data suggests that 2015 represents a continuation of the post-crisis trend toward concentration of capital among established, larger platforms.
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