Credit Suisse banks on rich shifting into hedge funds
Leading Swiss group's alternative investment unit expects wealthy investors to switch out of bonds after a year of negative performance
Credit Suisse, one of the world's largest private banks, is expecting a good year for its alternative investment business as the super-rich increase their exposure to hedge funds in light of record low returns for bonds.
Last year was the first time the market saw negative total returns on many safe-haven bonds such as US treasuries and German bunds. In comparison, hedge funds had their best performance since 2010, posting a return of 10 per cent on average.
Michael Levin, the head of alternatives for private banking at Credit Suisse in the Asia-Pacific, told the South China Morning Pos t many ultra-rich individuals were considering cutting investment grade bond exposure and buying into hedge funds.
"Asia-based investors who may have been under-allocated or not allocated in hedge funds are increasingly rethinking their hedge fund exposure," Levin said. "Both Asian and global investors are seeking to invest in hedge funds as a risk-reducing [strategy] for their portfolio, rather than risk-seeking.
"The inclination for investors in Asia to invest in hedge funds was … to see hedge funds as a risk-reducing proposition and a portfolio diversifier as they need to generate a fixed-income replacement strategy."
Total hedge fund assets globally surged to another record high in the first quarter, marking the seventh consecutive quarterly record, according to Hedge Fund Research. But returns from this asset class are less spectacular: a hedge-fund index tracked by HFR shows a 0.27 per cent loss year-to-date.