(HedgeCo.Net) Macro-economic instability and geopolitical uncertainty are driving renewed interest from large asset-owners in hedge funds. An article from Investment Magazine Australia reports that increased volatility is prompting pension funds and sovereign wealth funds to revisit hedge-fund allocations. Investment Magazine
Key observations:
- Institutional investors are shifting to more “skill-based” or idiosyncratic hedge-fund managers, rather than broad market strategies. Investment Magazine
- Liquidity, fees, transparency and strategy diversification are rising as top considerations in allocator decisions.
- Some former skeptics of hedge funds are now viewing them as portfolio “insurance” amid rising correlation among traditional assets.
Why this matters: If allocators increase hedge-fund allocations meaningfully, we could see further inflows (and industry growth). It also means increased competition among hedge funds to demonstrate differentiation, performance and client alignment.
Watch for: How much incremental capital flows from pension/sovereign funds, whether lock?up terms become more flexible, and how hedge-fund fee models respond to demands from large institutional investors.