Hedge fund managers not optimistic about second half of 2017: industry survey

BOSTON (Reuters) – Hedge fund managers have a dim view of the second half of 2017 after a solid start to the year, an industry survey released on Thursday showed.

Fundraising, which had picked up during the first six months of 2017, will likely slow and investor sentiment is more negative now than it was a year ago, hedge fund managers told industry research company Preqin which polled 140 respondents in June 2017.

“Fund managers do not feel optimistic about the months ahead,” Preqin researchers bluntly wrote in a survey titled “Hedge Fund Manager Outlook.”

Sixty-nine percent of those surveyed said they expected flows into hedge funds to be flat or negative in the second half. Many state pension funds have felt pressure from retirees and pulled out some or all of their investments amid growing complaints about the industry’s high fees.

The view marks a sharp contrast with the first half, when managers finally had reason to cheer. Months of outflows ended when $25 billion in new money came into the $3.38 trillion industry during the first six months. In 2016, $110 billion in assets were pulled out.

Fueled by a stock market rally ignited by President Donald Trump’s election win, hedge fund returns recovered in the first half and 67 percent of the managers surveyed by Preqin said they met or beat their own return goals. A year earlier only 50 percent met or topped their return goals.

But those improved statistics seem unlikely to last.

“Despite positive signs in regards to both performance and inflows, more fund managers reported that investors have

become more negative toward hedge funds over the past year,” the survey said.

Thirty-nine percent of fund managers polled expect to see outflows, the survey found. A number of state pension funds have pulled money out of hedge funds over the last months, complaining about high fees and low returns.

The industry’s “negative perception” is now one of the three top challenges for managers, Preqin wrote, adding that 36 percent of the managers said investors had become more negative toward hedge funds over the past year.