Instead, investors will be more selective about the funds they choose. “Some hedge funds are likely to fold, but 7% of funds were folding each year in any case,” says author Simon Hayley.
The reason for a more selective hand will be the lack of diversification highlighted by August’s returns. Correlations tend to rise during sell-offs, and “investors are likely to have over-estimated the degree to which moving into alternative assets would bring substantial diversification benefits”.
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