Alternative investment managers may be suffering valuation declines alongside most investors right now, but they are poised to enjoy outsize returns once the current crisis passes, says Fitch Ratings.

In a new report, the rating agency said that the global market disruption caused by the Covid-19 pandemic has generated “meaningful unrealized write-downs” for alt managers, but that this period “may create an environment for above-average returns” when more-normal conditions resume.

“Returns following the pandemic could be substantial given investment opportunities provided by the current market dislocation,” Fitch said.

The report noted that alt managers generated some of their best returns following the global financial crisis, due to locked-in fund structures that enabled them to ride out negative valuation pressure better than other investors.

Fitch reported that alt managers’ assets have held up very well during the current crisis, due to their locked-in model: “Aggregate fee-earning assets under management were down a modest 1% sequentially for the [first] quarter,” it said.

At the same time, alt managers are deploying assets to seize attractive new opportunities, Fitch said.

“Dry powder is being deployed primarily into liquid market opportunities with an emphasis on credit,” it said.

Some alt managers are also providing rescue funding for existing portfolio companies that are in financial distress, the report noted.

“Continued fundraising and the deployment of capital in funds that earn fees on invested capital also helped to offset lower valuations on funds that earn fees based on NAV [net asset value],” it said.

Fitch noted that large alt managers have continued to report “relatively solid fundraising since the onset of the crisis despite being unable to travel and meet with limited partners face-to-face.”