A conducive environment for alpha generation has made hedge fund returns more valuable and possible today. As the industry evolves, there has been a resurgence in demand for hedge funds via increased access points and methods of portfolio implementation.
1. Alpha Generation
Today’s backdrop of higher volatility and wider dispersion is conducive to alpha generation. We believe rising correlations between equities and fixed income, increased geopolitical and economic uncertainty and lower forward-looking market return expectations in the coming years provide a strong case for hedge funds today.
2. Continued Evolution
The hedge fund industry has evolved in size, complexity and anatomy. The space has also become more expansive with access points evolving (i.e. separately managed accounts and co-investments) and lines blurring between strategies. As a result, we believe the dispersion between managers has grown wider, increasing the importance of manager selection.
3. Increased Importance in Portfolio
As the industry continues to evolve from a macroeconomic, technological, and competitive standpoint, we believe hedge funds are well poised to benefit and continue to play a key role within portfolios.
