Political uncertainty continues to weigh on the minds of alternative investment investors as the proposed U.S. tax reform plan hits the news. Many are wondering what this reform means for AI, and whether it will affect cross-border activity. You’d think the level of uncertainty (considering prior political events, such as Brexit) that has emerged over the last 12 months would be a cause for concern for LPs, with respect to their AI allocations. But, as Intralinks survey results reveal, nearly three-quarters of investors (73%) say they have no plans to reduce the number of funds they invest in.
LPs are stacked with safety plans if markets go south. Intralinks’ survey finds that a number of LPs prefer to invest in hedge funds with multi‑sector expertise, rather than putting all their eggs in one basket with sector specialists. Adi Divgi, an investor of his NYC-based family vehicle, is one example.
“We haven’t yet decided to allocate to sector specialists in either healthcare or technology, but we think there might be opportunities. We currently prefer to get that exposure in a multi-sector format. When markets get frothy, greater flexibility in investment mandate might be warranted,” says Divgi.
Due to the market environment, some investors are skeptical that larger funds can achieve returns similar to their historical performance, and therefore avoid the largest alternative funds as a safety strategy. One LP, who prefers to remain anonymous, says, “We’ve put a number of hedge funds on a watch list and for at least one of them we’ve started the redemption process. In terms of the overall market environment, we are skeptical that the run-up in pretty much every market will continue. We are purposely avoiding the largest alternatives funds, those with USD10 billion or more in AUM.”
Overall it seems that there is a level of concern amongst LPs; however, a smarter, safer allocation strategy provides a buffer against political uncertainty. For more alternative investment insights like this, download Intralinks 2017 LP Survey.