Almost three quarters (74 percent) of investors in alternatives believe equity markets are at a peak – up from 61 percent at the end of 2018, according to the Preqin Investor Update: Alternative Assets H2 2019. Just 6 percent believe markets are expanding, down 15 percentage points in six months.
Alternative assets will be a vital part of many investors’ approach to weather a market event, notes the report.
For the asset classes operating in private capital, the majority of investors plan to hold course with their allocation strategy, in the expectation that these long-term strategies will weather a correction well.
Investors in hedge funds, though, are turning to the asset class’ defensive properties as their concerns around a correction grow: 64 percent of hedge fund investors are looking to position themselves more defensively as a result.
Among alternative assets, pricing concerns are also prevalent. While investors in real assets believe assets are fairly valued, private equity and real estate investors believe they are overpriced, and a correction in the pricing of these assets is due.
But the largest proportions – 56 percent of real asset investors and 46 percent of investors in private equity and real estate – do not anticipate a correction until 2020 or beyond.
Amy Bensted, head of data products at Preqin, says in a statement: ‘Increasing numbers of investors believe equity markets have peaked, with three out of four of every surveyed institution reporting this to Preqin.
‘The important question for investors is when – and how – they can weather a correction. Alternative assets will be key for many. Although pricing concerns in private capital continue, particularly in private equity and real estate, investors will be relying on these funds, and their proven long-term returns, to deliver during a downturn: nearly 90 percent of limited partners plan to increase or maintain their exposure in response to the potential correction in equity markets.
‘Hedge funds will have a defensive role: 64 percent of investors are positioning their hedge fund portfolios to be more defensive, as asset protection becomes a priority for them [while] concerns around a negative shift in public markets grows.’
