Institutional investors are rotating towards private debt, infrastructure, and diversifying hedge fund strategies as geopolitical and macroeconomic pressures continue to drive selective risk-taking, according to the latest quarterly Manager Intelligence and Market Trends report from bfinance.
Investor activity
Private markets remained the leading area of institutional mandate activity, representing 50 per cent of manager searches in the 12 months to March 2025—up from 43 per cent the previous year. While private equity remained subdued, demand for private debt and infrastructure remained strong, with the latter rising to 13 per cent of all private markets searches. Semi-liquid vehicles and asset-backed strategies featured prominently, reflecting investor demand for stable income with built-in flexibility.
Equity mandates accounted for 23 per cent of total searches, down from the previous year’s high, but with clear thematic shifts. Global equity rebounded to comprise 56 per cent of equity mandates, while investors increasingly targeted emerging markets, with strong activity in India, Saudi Arabia, and GEM ex-China. Enhanced index and systematic equity strategies also gained traction, as allocators sought more consistent, risk-aware outperformance.
In fixed income, overall search activity remained steady, but investor preferences shifted meaningfully. Multi-sector strategies rose to 20 per cent of fixed income mandates, driven by appetite for more dynamic duration and credit exposure management. In contrast, interest in high yield strategies fell to 7 per cent, reflecting concerns about stretched valuations and credit spread volatility. Emerging market debt continued to attract demand, supported by yield differentials and relative value opportunities.
Diversifying strategies saw growing interest, accounting for 13 per cent of mandates, with hedge fund allocations increasing. Investor appetite focused on market-neutral, event-driven, and alternative risk premia strategies. The latter delivered +3.7 per cent returns in Q1, extending a strong and consistent performance run that has re-energised allocator interest. Systematic strategies that de-emphasise directional risk also resonated in a quarter marked by reversals and dispersion.
Portfolio design
Amid market volatility and shifting policy landscapes, investors adapted their approaches. The first quarter was characterised by abrupt reversals in sentiment due to the reintroduction of tariffs by the US administration, reigniting stagflation fears.
As a result, there was a clear shift towards cash allocations, diverging from the traditional rotation into bonds. Meanwhile, gold reached record highs, reaffirming its role as a hedge against inflation and geopolitical instability.
Equity market volatility also influenced portfolio construction. Investors displayed caution around US equities and rotated towards European markets and targeted emerging markets, while also increasing allocations to enhanced and systematic equity strategies for sustainable alpha.
Manager performance
Performance across asset classes was varied. In equities, 56 per cent of active global managers outperformed the MSCI ACWI benchmark in Q1, led by value and defensive styles. Impact strategies, however, continued to underperform across one-, three-, and five-year periods.
In fixed income, emerging market and multi-sector strategies outperformed, while high yield managers faced headwinds. Among hedge funds, macro and trend-following strategies lagged, while more beta-neutral approaches led gains.
Oliver Wade, Associate, Investment Content at bfinance, says: “As global markets contend with rising volatility, inflationary persistence and geopolitical disruption, investors are rethinking how risk is allocated – not just how much risk is taken. We’re seeing a pivot toward asset classes and strategies that offer both adaptability and resilience: private debt, multi-sector credit, real assets, and uncorrelated hedge fund styles. Manager selection has become a more targeted exercise, with allocators looking for precision tools to match a more complex environment”
