Hedge funds diversifying their strategies, but slower to adopt AI and ESG, says EisnerAmper survey
While long/short and global macro strategies continue to be hedge funds’ bread and butter, one-third of respondents to a new survey of 184 alternative investment professionals by advisory and accounting firm EisnerAmper expect LPs to increase investment allocation to event-driven in the next 12 months, followed by credit (25 per cent) and quant (17 per cent).
The high number of corporate actions throughout the year, including mergers and acquisitions, restructurings and the rise of the retail investor, could explain the increased interest in event-driven strategy. When asked to name the top challenge for their business, hedge fund executives noted escalating regulatory scrutiny and compliance obligations (30 per cent) followed by increases in capital gains tax rates (27 per cent).
EisnerAmper’s survey also found that hedge funds are slower to adopt artificial intelligence and machine learning to make investments or trades, with 85 per cent of respondents stating that their hedge fund does not utilise these tools. ESG implementation follows a similar trend. Just 17 per cent of executives noted that their company has an ESG portfolio, similar to the number of executives who said so in last year’s survey.
“There was a resurgence of investor interest in hedge funds this year propelled by global growth, fiscal stimulus and low interest rates,” says Cogan. “We’re continuing to see investors deploy more capital to the asset class to diversify their portfolios and generate returns.”