More than 40% of hedge fund managers expect LPs to increase investment allocations to long/short and global strategies in the next 12 months, research from EisnerAmper suggests.
- LPs expected to up allocations to long/short and global strategies, with event-driven, quant and credit also tipped for increased investment
- Hedge fund adoption of artificial intelligence and machine learning tech remains sluggish, but is on the up
- Inflation, geopolitical challenges and escalating regulatory and compliance obligations are top concerns
More than 40% of hedge fund managers expect LPs to increase investment allocations to long/short and global strategies in the next 12 months, research from EisnerAmper suggests.
The result was taken from a survey conducted during the advisory and accounting firm’s 7th Annual Alternative Investment Summit last month. Last year, the strategy received 67% of the vote. Other strategies tipped for LP investment this year include event-driven (33%), credit (29%), and quant (19%).
While technology continues to develop and advance across the financial services industry, historically EisnerAmper’s survey has shown that hedge funds are slower to adopt artificial intelligence (AI) and machine learning (ML) to make investments or trades, and this year was no exception. Only 12% of hedge fund investors surveyed say they are currently utilising these tools in their investment process. While that number is still considerably low, it does however, represent an increase of more than double from last year’s survey when only 5% of investors said they were utilising AI or ML.
The survey, which was conducted during EisnerAmper’s 7th Annual Alternative Investment Summit, also revealed inflation and recession woes are here to stay for the alternative investment industry in general, with nearly three-quarters (74%) of alternative investment professionals believing that the United States is already in a recession, or will enter one by the end of the year. Along with inflation, geopolitical concerns and escalating regulatory scrutiny/compliance obligations were named as the top business challenges alternative investors will face over the next year.
Despite a tepid macroeconomic outlook, survey respondents still see opportunity in the fourth quarter. When asked to name the top two industries that present the best investment potential for the remainder of the year, 41% of respondents selected health care/life sciences. Optimism for tech investments still exists, despite this year’s tech stock ‘shake-out’, but has cooled rapidly since last year, with the sector being named as a top-two investment opportunity by 32% of respondents, down from 50% who regarded it as so last year.
This marks the first time in four years of EisnerAmper’s survey that tech did not capture the top spot. Infrastructure (20%), environment/sustainability (15%), and crypto/digital assets (11%) also garnered votes.
The survey also pointed to the opportunities and challenges that alternatives professionals continue to navigate with ESG. For the second year in a row, a lack of standardised reporting and data sets was chosen as the biggest barrier to implementing ESG, with 45% of respondents saying so.
“2021 has been a rollercoaster for alternative investment managers,” said Peter Cogan (pictured), Managing Partner of EisnerAmper’s Financial Services Group. “The ongoing war in Ukraine, coupled with global records of inflation and poor public market performance, have forced investors to be nimble in their investment philosophies.”
Key takeaway | With the US Federal Reserve making clear its determination to lower inflation, navigating the fallout will be a major, long-term challenge for alternative investors
