Moving further into a challenging 2016, investors remain apprehensive about the global financial outlook and they are in the process of accepting the new state of markets, which is the low-returns in equities and fixed income. Extensive QE and negative interest rates inflate the markets and constitute the main reasons for the low-yielding scenery and for the rise of alternative investment allocations. Institutions like insurance companies and banks find themselves amid a difficult situation making alternative income-producing strategies appealing. Political issues add uncertainty to the ever-changing status of markets, such as the ongoing Greek debt and the upcoming Brexit referendum and concurrent U.S. elections. Even earnings in big corporations are lowering, signalling the need for rebalancing portfolios and shifting to alternative investments.
Alternative investments constitute a broad category, but this perspective focuses on three asset classes: hedge funds, private equity and private debt. Hedge funds constitute the most debated and controversial asset class gathering the lights of publicity for numerous reasons. With over $3.23tn of assets under management according to BarclayHedge and over 5 thousand institutional investors, hedge funds are considered to be the elite of money managers charging the infamous 2/20 structure to their investors. There is a lot of discussion since the beginning of 2016 regarding high fees and bad performance indicating the upcoming reshaping of the industry following the divesting of major pension funds. Despite, the exodus of big names in the institutional spectrum, more and more pensions are attracted to hedge funds according to Preqin research, which contrasts the recent assaults on the asset class.