A belief that fewer alternative asset managers will better the returns of traditional equities and bond investments this year has prompted a reduction in client hedge fund holdings at Pictet’s wealth management unit, according to a report by Reuters.
The report cites Cesar Perez Ruiz, CIO for the Swiss investment group’s wealth business, as confirming that he had reduced the hedge fund allocation across client portfolios from 15% to 10% at the start of this year in the belief that clients were now “not compensated enough for the returns” hedge funds were likely to make compared to other assets.
Perez Ruiz is expecting investment-grade corporate bonds to return 6% to 7% this year, which he said makes it more difficult to justify “the illiquidity” of hedge funds. According to data from fund of funds investor LCH earlier this week, hedge funds returned an average of 6.4% last year, with the top 20 managers recording an average 10.5% return.
Perez Ruiz is also anticipating decent returns from equities this year, particularly Japan stocks, as well as those of mid-sized US companies. Growing expectations of US Federal Reserve rate cuts in the coming months, meanwhile, have boosted the popularity of corporate bonds, with January set to be the busiest month ever for issuance, according to an earlier report by Reuters.
