Hedge fund investors hunt credit, equity portfolios

NEW YORK (Reuters) – Big investors, such as pension funds and insurance companies, are willing to increase their allocation to credit and equity hedge funds through the rest of this year, according to a Goldman Sachs (NYSE:) survey.

The bank’s capital introduction team, which introduces hedge funds to money managers, interviewed in July 340 investors, with over $1 trillion invested in hedge funds.

Considering investors who want to increase allocation minus those planning to decrease, a net 31% of investors said they plan to deploy more money into credit hedge funds through the rest of 2023, mainly to long/short and distressed strategies, slightly down from the first half of the year.

Goldman Sachs said, however, that investors have not yet deployed the money. “It is still apparent from our flows data that inflows to the strategy have not yet materialized in any meaningful way,” the survey added.

Credit hedge funds were up 2.9% between January and June.

Second on the most-wanted list of global hedge fund strategies were equity long/short strategies, with a net 17% of investors planning to increase allocation. In the beginning of 2023, only 4% had such willingness.

Equity long/short strategies were up 5.3% in the first half of the year, according to Goldman Sachs, underperforming the main stock indexes.

Healthcare and biotech-focused funds are on the top of the list, followed by energy and utilities and technology, media and telecom.

One of the most sought-after strategies, multi-strategy funds appeared to be losing favor. A net 13% of investors planned to increase allocation, versus 27% in the first half of the year.

Demand for quantitative, CTA and systematic macro strategies was roughly muted, Goldman Sachs showed.