How Hedge Fund Strategies Are Shifting: ‘Lower Correlations And Increased Volatility’

By Javier Hasse

Taking into account the elevated valuation of equity markets and the fact that interest rates are going to rise, a lot of people want to diversify their portfolio, Steinbrugge went on. So, what Agecroft has been seeing is much higher demand for strategies with low correlations to long only benchmarks, which also tend to benefit from increased volatility.

“Some of the strategies that will see a continued increase in demand include: relative value fixed income, market neutral long/short equity, commodity trading advisors (CTAs), direct lending, volatility arbitrage and reinsurance due to their perceived ability to generate alpha regardless of market direction and as a hedge against a potential market selloff,” a recent report out of Agecroft explained.