Investors should understand the inherent risks of private assets, including illiquidity, longer lockup periods, and use of leverage. (UBS)

For the year ahead and beyond, private market managers should remain crucial providers of capital, with attractive return potential at appealing entry points today.


Alternatives can help investors in the year and decade ahead.


  • Today's world of high rates and attractive returns for many traditional assets should support hedge fund returns and their role as diversifiers.
  • Adding 20% alternatives to a balanced portfolio could increase expected annual returns by about 50bps per annum over the long term, for an equivalent level of portfolio volatility.
  • Investors should understand inherent risks of private assets, including illiquidity, longer lockup periods, and use of leverage.

We like alternative credit managers for 2024.


  • In hedge funds, we like specialist credit managers that exploit differences between strong and weak companies.
  • High global debt balances and lagged effects of high rates may boost bond price and spread volatility, supporting credit long/short managers.
  • We also see good strategic opportunities in distressed and special situation funds, given refinancing pressures.

Private markets offer attractive returns for the years ahead, at appealing entry points today


  • Secondary investments in private markets can offer more immediate returns, yet trade at a wide 16% discount to net asset value.
  • The "private-for-longer" trend supports private debt long term, but the potential for defaults and credit losses on existing loans warrants extra focus on quality, loan vintages, sector allocation and market segmentation, in our view.

Did you Know ?


  • Credit long/short funds have historically outperformed traditional credit roughly two-thirds of the time after a market sell-off, according to HFRI RV: Fixed Income Corporate Index and Bloomberg US Corporate IG Index data since 1993.

Investment view


We particularly like specialist credit hedge fund strategies and secondaries in private equity. Higher interest rates can also support return potential for alternative asset managers. Discretionary macro funds, which we also like, have proven resilient during crisis periods. Investors should understand the inherent risks of private assets, including illiquidity, longer lockup periods, and use of leverage.


Main contributors - Matthew Carter, Alison Parums, Jon Gordon, Karim Cherif


Original report - What can alternatives do for your portfolio?, 8 December 2023.