Over the past 18 months, aggressive interest rate hike policies by major central banks have increased the returns investors can achieve with minimal risk, according to a report by the Financial Times. However, this increases the pressure on hedge funds to improve their performance.
The rise in global borrowing costs, such as U.S. interest rates rising more than 5 percent in recent years, has led investors to hedge funds’ interest in such interest rate movements. parallel returns It strengthens the idea that it should be presented. Otherwise, funds may face refunds and cuts in fees, as well as losing a large portion of their customers.
Towers Watson Investment ManagementGlobal President Paul Berriman, “ It’s a big deal that the risk-free interest rate is now 5 percent. Hedge funds need to explain what they can offer their investors. The hedge fund industry needs to seriously adapt and confront the challenges it faces” said.
According to compiled data, hedge funds in the first seven months of this year 5.2 percentat the rate earning got it. A 5.2 percent return does not satisfy most investors. Because currently, the yield of government bonds in major economies is around 5 percent. So a risk-free 5 percent is more attractive to most investors than a risky 5.2 percent.
Sussex PartnersFounding Partner Patrick Ghali, “ We ask our managers what return they aim to make at the risk-free interest rate, and 99 percent of managers know that if they don’t meet that target, they won’t be in business” said.
