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Preqin: LPs not too worried about Brexit, say hedge funds will benefit most

Hedge funds are seen as the big winners of Britain’s vote to leave the European Union, according to a survey from Preqin.

Some 31 percent of hedge-fund managers expect a positive short-term impact from Brexit, Preqin said. Only 13 percent of private capital, which includes private equity, say the referendum will be good for them over the next 12 months, the survey said. Within private capital and hedge funds, 45 percent and 28 percent respectively say Brexit will have no effect in the short term.

Longer-term impact

Hedge funds were also more positive about Brexit long term. More than a fifth, or 23 percent, of hedge-fund managers expect Brexit to be good for them. Only 9 percent of private capital felt this way, Preqin said. Fully 40 percent of hedge funds and 40 percent of private capital expect no effect long term, Preqin said.

After questioning LPs, Preqin found that more than a third, or 35 percent, say Brexit will benefit hedge funds, while only 12 percent of institutional investors view it as good for PE. On the other side, 22 percent of investors thought the referendum would negatively impact HF and 30 percent said it would be bad for private capital, Preqin said.

“The general impression is that hedge funds are better placed, they’re able to trade quicker and are able to capitalize better on short-term opportunities than private equity,” said William Clarke, a Preqin spokesman.

Preqin questioned 142 alternative-investment firms — 75 closed-end private-capital-fund managers and 67 hedge-fund managers — from June 30 to July 4 about the implications of the U.K.’s referendum. On June 23, a majority of Britons voted to leave the European Union.

The survey does not separate out PE directly but looks at the broader industry of closed-end funds, Clarke said. Private capital, in the survey, includes private equity, real estate and other closed-end funds, he said. Read the survey here.

Hedge-fund managers are also more positive about dealmaking in the U.K., Preqin said. Nearly half, or 45 percent, of HFs expect to make the same number of investments in the U.K. over the next 12 months. About one-fifth, or 21 percent, of HFs think they’ll do more deals.

More than one-third, or 35 percent of private-capital managers say they’ll make the same number of deals, while 29 percent said they will likely do fewer deals in the U.K. Only 3 percent think they’ll do more deals in the U.K., Preqin said.

When it comes to the European Union, 26 percent of hedge funds were uncertain about investing in the EU over the next 12 months. Less than half, or 46 percent, of HFs think they’ll make the same number of investments.

Twenty-nine percent of private-capital managers were uncertain about investing in the E.U. during the next year while 46 percent said they’ll do the same number of deals. Only 14 percent of HFs and 17 percent of private capital said they’ll do more deals, Preqin said.

Interestingly, private capital said it will do better in the E.U. over the long term. A quarter of those polled say they’ll do more deals compared to only 8 percent of hedge-fund managers.

What do LPs think?

Preqin also surveyed 50 institutional investors globally about Brexit’s impact. More than half, or 58 percent, of private capital LPs said the referendum would have no impact on their portfolios over the next 12 months, while 30 percent think the repercussions will be negative. Only 12 percent believe Brexit will be positive.

On the hedge-fund side, 43 percent of HF investors say the referendum will have no impact on portfolios while 35 percent see it positive and 22 percent negative.

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