Bangalore: About $80 billion worth of new capital will be invested in hedge funds this year throughout the world, reports Bei Hu of Bloomberg. This is the largest amount invested in hedge funds since 2007.

This data was given by a Barclays report.  This report was generated by studying and interviewing investors, with investments of about $500 billion in hedge funds, present at a symposium held in New York. Moreover, nearly $300 billion will also be invested in hedge funds from existing investments. Nearly 56 percent of the investors interviewed by Barclays tend to expand their hedge fund investments in 2012. This number is more than seven times the number of investors, who plan to reduce their hedge fund investments this year. A few sources of new capital investment include – foundations, endowments, public pensions and private banks. Ajay Nagpal, Head of Prime Services of Barclays, says how 2012 “has the potential to be the most significant year for new capital allocations to hedge funds since 2007.”

This immense investment in the hedge funds sector is contrasting to that of last year’s as the performance of hedge funds was the 2nd worst last year. Investors plan to invest their capital in short-term trading because of the present global economic scenario and volatile markets. Also, short-term trading does not get affected much by fluctuations in the stock markets of the world. Investors are looking forward to invest in specialized financial products, with the size of the investments going up to $1 billion.

Louis Molinari, Head of Capital Solutions at Barclays, quotes, “With the greater transparency and better fee and liquidity terms that many new and smaller funds offer, investors continue to gain confidence with investing in this segment of the hedge fund industry.” This is so because “smaller managers are frequently seen by investors to be more agile in adapting their existing strategies to generate alpha.”

Diane Harrison, Principal of Panegyric Marketing, has advised emerging hedge fund managers to strongly focus on certain factors. A few of these factors are – strategic partnerships for outsourcing, bracing up for tough competition, moving from traditional asset classes to others, partnering with small managers, embracing family businesses, thinking of out-of-box strategies for investments, educating investors about investments and accepting the process of due diligence. Paying attention to these points will only aid investors with their hedge fund investments.