LONDON, Aug 2 (Reuters) - Global investor appetite for

the most expensive multi-strategy hedge funds has fallen,

Goldman Sachs ( GS ) said in a report to clients seen by Reuters

on Friday, though more investors plan to add hedge funds to

their portfolios.

Goldman Sachs' ( GS ) data from a survey of over 300 investors like

family offices, sovereign wealth funds and pension schemes

showed that just 15% were still willing to pay for so-called

pass-through fees, where the hedge fund passes on its costs.

The figure has declined from just over a fifth of investors

willing to take on the extra fees this time last year, said

Goldman Sachs ( GS ).

The biggest multi-manager hedge funds charging pass-through

fees now take over half of gains back, leaving investors with an

average 42% return on investment, after expenses and performance

fees were deducted, said an earlier report by Barclays ( JJCTF ).

These hedge funds saw their highest proportion of outflows

totaling 1.5% of assets managed in the first half, with net

outflows overall about 1.1% of assets managed across all

strategies, except systematic investing strategies, which saw

net inflows.

"The flows picture has remained challenging thus far in

2024," Goldman's report said.

Goldman said endowments and foundations may have withdrawn

funds to pay for other parts of a portfolio tied up in private

markets.

The survey also showed, however, that the highest proportion

of investors since 2020 planned to add more hedge funds to their

portfolios.

Hedge funds beat private credit for the first time as the

most popular asset class overall. The much-hyped strategy where

companies borrow directly from specialised funds, bypassing

banks and the bond market, saw the proportion of investors

looking to cut their exposure almost double to 11% from 6% in

2023, the bank said.

Most investors willing to increase spending on alternative

investments that Goldman surveyed generally did not change their

minds from a similar survey the bank ran in 2023 except for a

huge drop in interest funds that take long only positions in

bonds.

Customer optimism for hedge funds has rebounded to the

highest level since 2020, with over 85% of investors telling

Goldman that performance of their hedge fund portfolios exceeded

or met expectations for this year, up from 67% in 2023.