alternative investment

Hedge funds suffered in the first-quarter of 2020, as the Covid-19 pandemic drove billions of losses and also pushed investors to seek redemptions, resulting in a significant dip in hedge fund assets under management during the period.

Institutional investors surveyed by Eaton Partners remain focused on finding sources of relatively uncorrelated return from their alternative and private market investments, while the majority intend to stay with their allocations to alternative investments, citing a long-term focus.

Investors seeking diversified sources of return, particularly with little correlation to broader financial market factors, remain key drivers of allocations to the alternative asset classes of the world and appetite for these assets continues to grow.

Institutional investors are generally looking to stick with their private market allocations, despite the dislocation caused to financial markets by the Covid-19 coronavirus pandemic, with sources of return that exhibit lower correlation seen particularly favourably, a survey by Eaton Partners found.

Investors of the world are increasingly expecting a widespread downturn in the equity markets, leading to search for new sources of alternative return, particularly asset classes that are less correlated with broader financial trends, says Preqin.

Alternative investment managers and funds are sitting on approximately $1 trillion of undeployed capital or “dry powder” and with few other attractive opportunities available, insurance and reinsurance linked investing has been cited as one of the more attractive asset classes.

The alternative investments sector is forecast to see explosive growth over the coming five years, with alternative assets under management, consisting of private capital and hedge funds, likely to reach $14 trillion by 2023.

Institutional investor appetite for alternative investment asset classes is on the rise, with more investors now allocating to alternative asset classes and the main driver continues to be a hunt for diversified returns for their portfolios.

The world of hedge funds and alternative investment strategies is moving fast and the Chief Investment Officer of massive A$166 billion Australian sovereign wealth fund, the Future Fund, is happiest allocating to what he terms Hedge Funds 2.0, a categorisation that ILS and reinsurance fits into.

European pension funds have been increasing their allocations to alternative investments and this looks to have been benefitting the insurance-linked securities (ILS) space, with the percentage of EU pension funds that have an allocation to ILS doubling in the last year, according to consultancy Mercer.