Tuesday, January 31, 2023

Investors still see alternatives as inflation hedge


  • Alternatives remain viewed as hedge almost a year into inflation crisis
  • Returns and diversification are secondary in investor minds
  • MPG asked research firm PureProfile to canvas 100 European investors

Providing an inflation hedge is the top reason investors are moving money into alternatives, according to a new survey commissioned by Managing Partners Group (MPG), an asset manager. 

Protection against rising prices was followed “an attractive yield” and “diversification benefits” as the second and third most cited reasons in MPG’s survey of 100 institutions and wealth managers in Europe, which has historically had less risk appetite for alternatives compared to US allocators.

Almost a quarter (23%) said their attitude to alternatives has become much more positive while 65% say it has become slightly more positive. MPG canvassed investors in Switzerland, Germany, Italy and the UK during September.

More than two thirds (68%) said the funds they help to manage have increased their allocation to alternatives during the past 12 months. Of these, 11% say they their allocation to alternatives has increased dramatically. 

The global pandemic “fundamentally changed professional investors opinions of alternatives and the benefits of these asset classes,” according to Jeremy Leach, Chief Executive Officer at MPG.

It’s helped them to not only be seen in a different light, as they can provide a hedge against inflation as well as an attractive yield but has driven up allocations in the last six months. And this trend looks set to continue, with investors increasing their allocation to alternatives in the next 12 months.”

For more essential industry context, click here to read AFI’s Hedge Fund & Private Market Insight: Q4 2022