News & Initiatives

Sizable swathes of the hedge fund industry have been left battered and bruised by 2022’s market turmoil. Managers across a range of strategies are nursing losses and capital outflows as the year draws to a close, while headlines suggest the appetite for less liquid alternatives – such as private equity and debt – continues to outweigh that of hedge funds among many allocator groups. And yet investors continue to show faith in hedge funds, as the findings of this latest Hedgeweek Insights report illustrate. Travis Williamson, Partner and Head of Hedge Fund Investment Due Diligence, at Albourne Partners, says investors are looking for assets that are correlated with inflation, have return streams unrelated to economic activity, and that provide a hedge to the higher market volatility that inflation creates. “Hedge funds are a particularly helpful asset class when thinking about the latter, as they are relatively liquid. Elsewhere we see continued focus on real assets, due to its inflation linked return profile.” Q&A: What are some of the major trends among private wealth investors when it comes to hedge fund allocation in 2023, particularly when compared to interest in other alts? Travis Williamson: “The appetite for alternative investments among the HNW group continues to grow. Many sophisticated investors are looking for ways to diversify, particularly following a period where some historically sound allocation frameworks have been challenged.” What are some of the issues keeping hedge fund allocators up at night? Travis Williamson: “Many issues and trends are strategy specific, but the overall trend of hedge funds becoming less liquid, from an LP perspective, is a significant trend. Hedge fund managers have become more dynamic in the pricing and liquidity profile of their offerings, and given the capacity constraints faced in many strategies, hedge fund managers are introducing more pass-through fee structures with reduced investor liquidity. This trend began in the large players within multi-strategy space and has permutated the industry.” Please click on this link to access the full report.

The spectre of trapped capital has heightened the desire for efficiency, according to a panel discussion during ILS Bermuda’s Convergence conference. There are various ways to manage capital efficiently and thus calm the nerves of an investor in insurance-linked securities (ILS). According to Michael Hamer, partner and senior analyst at Albourne, this topic has become a focus for investors because, over the last four or five years, substantial amounts of invested capital has become ‘trapped.’ As moderator of the panel “Reduce, reuse, recycle” at ILS Bermuda’s Convergence conference, Hamer began with a positive message. “A number of managers and service providers have been very active in trying to develop ways of making the investments more efficient. One of the areas that in particular has really grown quite rapidly is providing investors with a significant amount of non-recourse leverage through the use of rate and balance sheets, and tail hedges,” Hamer said. For the full article please click here.