Demand for real assets in the hedge fund industry will rise as investors look to move away from traditional funds into the alternative space, new research has shown.
Latest research from EY revealed that 48% of surveyed investors anticipated that the biggest shift over the next five years would be from traditional hedge funds to alternatives including private equity and real estate.
According to the research, larger fund managers offering a more diverse set of non-traditional fund products are attracting capital, while managers solely offering traditional funds are becoming increasingly challenged.
The results are closely linked with research conducted by BNY Mellon earlier in the year concluding that private equity, real estate and infrastructure managers anticipate strong growth in assets over the next five years.
BNY put its results down to global macro-economic, social and environmental shifts fuelling a need for investments in real assets, property and infrastructure worldwide.
“Investors are turning more and more to real assets to find yield, diversify their portfolios, and steer through volatile markets,” said Alan Flanagan, global head of private equity and real estate fund services at BNY Mellon, at the time of BNY’s research.
“The growth in real asset investments has been impressive and there is no sign of it slowing down. As a result, the marketplace has become increasingly competitive on deal sourcing, presenting challenges for managers to successfully deploy the capital they have raised.”
EY’s research also indicates that the increase in alternative funds demand reflects a greater trend with investors currently seeking more specific investments as part of their overall portfolios as well as demanding increased transparency and flexibility of their investments.