Investors shifting away from hedge funds to other alternative investments

Investors seeking exposure to alternative asset classes are increasingly looking beyond traditional hedge funds, according to new research from Ernst & Young Global Ltd. (EY).

The firm reports that its latest survey of global investors found that almost half (48%) of investors expect to shift from to other alternative investments during the next three to five years.

“Hedge funds are experiencing slow growth globally. With an abundance of low-fee investment options and savvy investors pushing for fee transparency, we’re seeing a bit of a fight for growth, in Canada, too,” says Fraser Whale, Canadian alternative funds leader with EY, in a statement.

Indeed, hedge funds aren’t immune to the effects of the second phase of the client relationship model (CRM2) reforms that are pushing increased transparency on the Canadian investment business.

“In Canada, CRM2 regulations are bringing the importance of transparency and management costs to the forefront,” Whale notes.

Amid this increasing transparency, investor costs are also declining as EY reports that the average expense ratio for hedge funds declined to 1.84% in 2016 from 1.95% in 2015. However, the report says, “investors feel there is still room for improvement.”

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