Geopolitical and economic factors may be behind a potentially significant shift in hedge fund investment and business strategy, including increased fundraising activity and diversification, according to a survey by Dynamo Software, a Bulgarian cloud software provider for the alternative investment management sector.
Dynamo’s survey reveals that a much higher number of hedge funds – as compared to the overall GP marketplace – expect to see bigger fundraising efforts, with more than half (55%) of those surveyed saying they expect to increase fundraising activities moving into 2025.
Just 30% of the overall GP community said the same when they were surveyed by Dynamo at the beginning of 2024.
In terms of investment allocations, nearly half (45%) of hedge fund participants are planning to diversify across multiple asset classes over the next 12 months, compared with just 25% of the overall GP sector including diversification in their investment strategies over the coming year.
The survey also reveals that the top five geopolitical and economic factors influencing these expected hedge fund moves are: interest rates (cited by 80% of participants); the US presidential election (78%); geopolitical conflicts (63%); economic recession (61%); and global trade tensions (43%).
In pursuing these strategic shifts in investment and business strategy, hedge funds anticipate a few potential roadblocks, with the survey identifying the top three challenges as: “fundraising in current marketing conditions”; “managing key client relationships and investor reporting”; and “delivering alpha to justify fees.”
Regarding the use of technology in helping to overcome these challenges, the majority of respondents identified “in-depth reporting for investors” (63%) and “automated workflows” (63%) as key priorities for their firms. Just over a quarter of participants (27%) expect ESG/DEI to become a greater need within those in-depth reporting initiatives.
The survey also indicates that more hedge funds see growing value in the collaboration of humans and technology, with “empowering the whole team to leverage it” among the top three most important factors when implementing new technology. At the same time, they are evaluating AI cautiously, which garnered the fewest votes when asked what was most important in a new technology.
In 2021, Dynamo received a strategic growth investment from Blackstone Growth. At the time, its valuation was estimated at $900m.
