White paper An industry in transition - The case for hedge funds

Can hedge funds be fixed-income alternative? Our paper argues that supplementing equity exposure with hedge fund allocation my help investors stay the course for the long term

11 Oct 2017

Traditional investment approaches have long relied on bond allocations to preserve capital and generate income, and on equity allocations for growth and capital appreciation. However, investors are now faced with a unique set of challenges as markets grapple with regime change, central bank policy normalization and low interest rates. As a result, sophisticated investors are seeking alternative sources to bolster returns. Hedge funds have the potential to provide an attractive solution and provide complementary exposure to traditional, long-only investments. By allocating across hedge fund strategies, investors can access diversified approaches that seek to provide consistent, risk-adjusted returns with historically reduced volatility.

Adding hedge funds to a traditional portfolio

Source: UBS Asset Management, Morningstar. Data for the period of 31 July 1997–31 July 2017. Global equities are represented by the MSCI World index. Fixed income is represented by the Barclays Global Aggregate Index. Hedge funds are represented by the HFRI Fund Weighted Composite. Indices are shown for illustrative purposes only. Please see endnotes (page 7) for index descriptions. Past performance is not indicative of future results.

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