The upheaval in financial markets caused by shocks such as the COVID-19 pandemic and Russia’s invasion of Ukraine significantly changed how investors behave, increasing the appeal of alternative investments such as hedge funds to boost returns.Confronted with the fastest pace of interest rate increases in decades, rocketing inflation and slowing economic growth, investors panicked, causing market volatility to soar.
One of the few beneficiaries of the turmoil in financial markets has been hedge funds, which can be used to diversify or reduce risks in a portfolio and generate positive returns even when markets are falling. Hedge funds are rising in popularity because investment mandates given to money managers are more flexible, meaning they can use more strategies to generate returns.
However, these expenses have decreased considerably and must be weighed against after-fee performance. Novare has researched the industry for almost two decades and surveyed 64 asset managers who collectively manage more than 161 uniquely mandated hedge funds for the annual report.While some believe they charge a fair fee, most respondents agreed that costs could be negotiated down if the investment is large enough, there is an existing relationship, a long lock-up or a prolonged period of poor performance.
The collapse of US banks and Credit Suisse have spurred fears that the crisis may slow the world’s economy by hindering lending.