Alternative asset classes regain favour as interest rates tick down
Rate cuts are just one of the many factors driving investors to seek returns outside of equities
THE cutting of interest rates by the US Federal Reserve has seen investors shift their allocations away from equities. But this has proved to be positive for alternative asset classes such as private equity (PE), venture capital (VC) and hedge funds.
A survey by data platform Preqin in November 2024 showed about 50 per cent of investors were looking to increase capital allocation to PE and 31 per cent of investors to VC. This is an improvement from 2023, when more investors sought to pare down allocations to PE and VC.
Michele Ferrario, co-founder and CEO of StashAway, said: “Rather than moving away from equities, we saw clients reduce their cash allocation in 2024, reallocating funds from cash management solutions to public and private market investments.”
Private banks and wealth management platforms queried by The Business Times said that investors have shifted their allocations away from equities and into alternatives.
Bank of Singapore has experienced double-digit year-on-year growth in their clients’ investments into alternatives in 2024, while UOB clients’ allocation to private-market funds almost doubled.
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