Kepler Partners has hosted the first of its new CIO Perspectives event series, bringing together senior allocators from across the industry to discuss pertinent themes in alternatives. The inaugural panel featured speakers from UBS, UBP and Lombard Odier, who shared their thoughts on the outlook for hedge funds.
The overall tone of the discussion was upbeat, the firm writes, with allocators excited about how the case for investing in hedge funds continues to develop in today’s environment. The hedge fund space has evolved considerably in the past decade, capturing a wide variety of sub-strategies and different manager approaches which offer a rich set of opportunities for investors, the firm says.
Henrietta Boag, CFA, Director – Asset Management, Kepler Partners, says: “We are delighted to bring together senior allocators from across the industry to discuss pertinent themes across the Alternatives space in our CIO Perspectives series. With Kepler’s deep manager research capability and extensive allocator network, we are well positioned to curate a series of insightful discussions across the allocator community, designed to create connectivity, respectful debate and innovation. We look forward to rolling out the initiative more broadly in the coming months.”
Farès Jaafar, CFA, Head of Hedge Funds, Bank Lombard Odier & Cie SA, says: “Hedge funds offer an amount of variety both in return diversification and return enhancement, appealing to different risk appetites in the process. This creates ample scope to construct portfolios that meet clients’ varying individual aims. When searching for attractive opportunities, we often look for strategies that offer either convex returns, diversification benefits, or enhance risk adjusted returns with the compounding effect of alpha over time, which can be a powerful blend. We look to identify uncorrelated sources of alpha and seek out managers who deliver on their strategy objectives across market cycles.
“Looking ahead, there is a growing sense of market optimism around hedge funds, with macro trends and market dispersion offering good opportunities across a variety of both directional and relative value strategies. Lombard Odier believes the asset class offers benefits in a multi-asset portfolio context, and has recently increased its strategic allocation to hedge funds”
Anthony Murphy, CFA, Managing Director & Senior Investment Manager, UBP Alternative Investment Solutions, says: “Hedge funds play two important roles: providing diversification and enhancing returns. We seek to build client portfolios that provide this by emphasising pure alpha opportunities across the peer group. Customisation of client portfolios has become more sophisticated over time; with the range of options currently available across hedge funds, we are able to construct offerings that are tailored in terms of risk-return profile, liquidity and fees.
“The current opportunity set for hedge funds looks strong given volatility, dispersion and correlation levels in underlying markets. At a macro level, with economic and political uncertainty and diverging fiscal and monetary policies around the globe – managers should be able to take advantage of these conditions. We have seen a significant uptick in investor interest in hedge funds over the past 12-18 months, in order to diversify away from traditional market returns and offset potential volatility shocks. As a result on an absolute and relative basis, hedge fund strategies look attractive.”
Karim Cherif, Head of Alternative Investments, UBS Global Wealth Management CIO, says: “In an asset class as varied as hedge funds, manager selection is everything. Understanding managers’ strategies and their consistency of returns is vital in ensuring outcomes for investors and constructing the right portfolios around the right objectives.
“Since the pandemic, there has been a shift in sentiment, with investors acknowledging the value that hedge funds can bring to portfolios as a complement to bonds and equities and as a diversifier – this has driven up appetite for the asset class. 2025 presents a supportive environment for hedge funds, with growth in the US and recovery in Asia and Europe; but uncertainty around geopolitics creates a strong impetus for investors to seek diversification. In today’s market environment, there are very few diversifiers that can help offset volatility as effectively as hedge funds, especially when rates have moved as much as they have.”
