Credit strategies are the most sought out alternative investment in 2024 with 33% of the market interested in adding.
This is according to BNP Paribas in its 2024 Alternative Investment Survey, however, only 21% added to credit, whereas 48% did in the previous year.
In addition, 2023 saw MSCI World return 24% whilst hedge funds returned 7.6%, the opposite of 2022 when the market struggled and hedge funds helped protect capital.
Over the 48 months, 2022 and 2023, the average hedge fund outperformed global equity markets by 5.72%.
China also saw interest decrease following the Covid-19 pandemic and its property market crash. Last year, 42% of investors pulled capital from China-focused hedge fund managers, but this expected to slow down in 2024.
Furthermore, separately managed accounts (SMAs) are expected to grow in 2024 as part of alternative investment. 13% of allocators are looking to add to hedge funds via an SMA structure, with half of these being first time SMA allocators.
Ashley Wilson, global head of prime services at BNP Paribas, said: “BNP Paribas credit prime platform is well positioned to support the continued growth of credit strategies as highlighted in our survey this year. We have integrated repo into prime enhancing our borrow and financing solutions which will help our clients execute their strategies and deliver returns to their investors. We are encouraged to see more allocators considering quant multi strategy, as these managers have clearly differentiated themselves in the past three years, however limited capacity in these funds will remain an obstacle for investors akin to that of the larger multi manager platforms.”
Marlin Naidoo, global head of capital introduction at BNP Paribas, added: “Allocators are starting to position for an era where alpha and diversification are finally expected to deliver strong returns, as they anticipate a departure from the past decade’s US equities dominance. Whether through asset allocation changes or a portable alpha implementation, this pivot spells opportunity for hedge funds.”
