Hedge funds in a higher interest rate environment
The shift in the interest rate landscape has important implications for hedge funds and their institutional investors. Discover how to navigate the changing interest rate landscape and potentially maximizing your hedge fund returns in a higher rate environment. Elevate your investment approach with insights from Mercer.
As interest rates shift from a decade of lows, it's crucial to understand the implications and opportunities that arise for hedge fund investors.
At Mercer, we have long advocated for considering hedge funds with a cash+ return expectation. With cash rates now projected to be in the 3-5% range, it's time to revise our expectations.
While the markets presently grapple with the questions of interest rate cuts: if, when, and how many; consensus has finally coalesced around the idea that we are now in a higher for longer interest rate environment.
So, what does that mean for hedge funds?
Hedge funds, with their revised return expectations, offer potential compelling advantages compared to traditional assets. Coupled with the downside protection and potential diversification benefits they provide; investors may have every reason to be excited about hedge funds again. However, it is important to note that hedge funds also come with potential risks, and investors should consider these factors to maintain a fair and balanced perspective.
In this video, we explore the impact of higher interest rates on hedge fund performance and why investors should pay attention to the cash component of hedge fund returns. We also discuss the potential opportunities that arise for hedge fund investors in a higher rate environment and highlight specific strategies that can be advantageous.
At Mercer, our team of alternative investments specialists are dedicated to helping you create a portfolio that aligns with your organization’s investment objectives. With our extensive knowledge, deep expertise, and global scale and resources, we may be able to provide you with access to a wide range of alternative investments tailored to your specific investment needs.*
By partnering with Mercer, you gain access to a wealth of experience and a flexible approach that can accommodate both first-time investors in alternative investments and those with established portfolios. Whether you’re exploring hedge funds or other alternative investments, our team can guide you through the process and help you achieve your investment goals. Take the first step towards constructing a successful hedge fund portfolio by contacting a Mercer consultant today. We are ready to assist you in navigating the complexities of alternative investments and creating a strategy that fits your unique requirements.
While extremely accreditive relative to fixed income and valuable within a portfolio construction framework, the prolonged period of this nature has led many to forget the cash part of the cash+4 equation. We highly recommend taking a step back and doing the math.
