This content is from: Portfolio

Morning Brief: Investors Expected To Boost Allocations by as Much as $350 Billion

Barclays says hedge fund allocations are set to rise in 2018, but the money will be concentrated into fewer managers.

  • By Stephen Taub

Hedge fund investors were unsurprisingly upbeat heading into 2018 coming off the strongest year since 2013. Barclays Capital Solutions forecasts that gross hedge fund allocations will increase by $300 billion to $350 billion this year, up 15 percent from its prediction a year ago, according to the investment bank’s recently published 2018 Global Hedge Fund Industry Outlook. On a net basis, Barclays expects inflows to amount to $40 billion.

“The trend of manager consolidation within investor portfolios appears likely to continue, which suggests that flows this year will be increasingly concentrated into fewer managers,” the report states. Where do investors figure to allocate their money? Barclays says investors expressed the greatest interest in sector-focused equity, equity market neutral, and systematic strategies, for both equities and commodity trading advisers.

“The recent trend of growth in quantitative strategies is poised to continue,” the report adds. At the same time, Barclays reports investors appear to be reducing long-only exposure—both equity and fixed income. The report also predicts that commingled funds will probably continue to lose share to separately managed accounts or so-called funds of one. However, Barclays stress this trend toward separate accounts will mostly come from existing investors increasing their allocations, rather than entirely new investors adopting them.

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Steel Partners says it entered into a confidentiality agreement with Babcock & Wilcox Enterprises related to a possible negotiated business combination or other strategic or financial transaction. The hedge fund firm headed by Warren Lichtenstein also said it intends to fully exercise its rights under the company’s rights offering, which was launched on March 19. The power generation company says in a press release it expects to issue a little more than 62 million shares in connection with the rights offering, including shares issued to Vintage Capital Management, which is the backstop purchaser. Vintage is by far the largest shareholder, with about 32 percent of the total, while Steel is the second largest, with 14.8 percent of the shares. In December, Steel Partners offered to acquire Babcock for $6 per share. On February 1, the company named a new chief executive officer, Leslie Kass.

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Booth Bay fund Management disclosed it owns 7.4 percent of Tiberius Acquisition Corp., a blank check company that priced its initial public offering on Tuesday. Tiberius was created to do some sort of deal, most likely in the insurance sector.

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