Half of the global investors surveyed by Bank of America's prime brokerage department intend to increase their investments in hedge funds this year, while 37% prefer to keep their allocations unchanged.
According to the bank's report released on Friday, this marks a 2% rise in the desire to boost hedge fund investments compared to the beginning of 2024. The survey drew responses from 256 firms collectively overseeing over $1 trillion invested in hedge funds.
The report also noted a decrease in the proportion of investors looking to withdraw from hedge funds, dropping from 12% in 2023 to 7% in 2025, with dissatisfaction arising from underperformance as the primary reason for redemption.
Among the concerns highlighted in the report were investors' dissatisfaction due to hedge funds altering their investment strategies or simplifying their portfolios. Moreover, worries about crowded trade positions and hedge funds growing too large to maneuver efficiently also featured prominently.
The study revealed ongoing worries regarding hedge funds deviating from their stated specializations for profit, talent retention, and the trend of smaller hedge funds with assets under $500 million facing a lower risk of investor exodus.
In specifics of investment preferences, investors in 2025 showed a heightened interest in stock and bond trades over trend followers and systematic funds based on macroeconomic events. Notably, negotiability on fees improved compared to the previous year, with more investors securing fee discounts and better liquidity terms for their hedge fund investments.