A macroeconomic environment of increasing interest rates, more dispersion and greater volatility is pushing institutional investors’ demand for hedge fund allocations, says Allen Cheng, co-head for North American hedge fund investments at Aon.

“The environment has been pretty beneficial. If you look at overall demand, I would say over the last three years, it has been trending up.”

Read: Expert panel: Have hedge funds budged on hurdle rates?

Since 2022, he adds, performance has shown that of a zero-rate environment but with rates going up, it equities may be dampened.

“There has been a little bit of a trend in portable alpha, where [investors] can replicate a 60/40 [portfolio] via futures that’s very efficient in terms of cash futures. [Investors then] take the remaining 55 per cent or 60 per cent and invest it in a liquid form of a hedge fund to pick up [beta and alpha] on top with the same dollar amount.”

Cheng has noticed a change in sentiment to hedge fund strategies........

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