US, Asian investors turn to European and MidEast hedge funds, BofA survey shows

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By Nell Mackenzie

LONDON (Reuters) -Wealthy investors in the United States and Asia have cancelled plans to put money into U.S. hedge funds this year, while increasing their exposure to Europe and the Middle East, according to a Bank of America survey seen by Reuters on Thursday.

Half of the allocators who told Bank of America last year they would invest in U.S. hedge funds have now ditched these plans, according to the survey.

The report, which canvassed 263 respondents, representing around $840 billion of industry cash, showed European allocations exceeded expectations by 8%, based on the bank’s data, which compared surveys done during the fourth quarter of last year to its most recent investor survey carried out this August and September.

U.S. and Asian investors led the move into hedge funds based in Europe and the Middle East, where several global hedge funds have set up shop in Abu Dhabi and Dubai in recent years.

The biggest of these, which manage over $10 billion, favoured deals with hedge funds called separately managed accounts – special investment vehicles that are created for a single allocator.

Firms like pension funds, sovereign wealth funds and family offices have poured $37 billion into hedge funds so far this year, the most new money the industry has seen since at least 2016, said BofA. 

While some hedge funds will return an investor’s money in a day, some will lock up money for as long as five years.

In public markets, money has more recently returned to U.S. equity funds, where weekly flows tracked by EPFR hit a year-to-date high of almost $58 billion last week. 

(Reporting by Nell Mackenzie; Editing by Amanda Cooper and Kirsten Donovan)