01
02
03
04
Global demand for food and water is increasing just as the availability of clean water and farmland is shrinking
Growing Global Population
Rapid Urbanisation and Improved Living Standards
By building new homes and the cities we live in and improving overall quality of life a growing demand for raw materials and energy has been created
Energy Transition and Electrification
The global energy transition and large scale electrification of the economy are likely to stimulate the demand for a variety of scarce transition-related commodities
Rising Geopolitical Tensions
Uncertainty fuelled by geopolitical tensions has added significant additional pressure to global energy supplies, fertilisers, food, metals, and more
Structural factors: the greenflation
Thanks to portfolio diversification*, absolute return strategies may offer a number of potential benefits during periods of high market volatility, as they normally strive for a low correlation with equity and bond markets
In our view absolute return funds aim to deliver a positive return in all types of markets conditions
The diversity in the asset allocation process of an absolute return fund may allow for a greater flexibility and dynamism in the portfolio
We believe pursuing an absolute return strategy could offer potential downside protection when markets are distressed
*Diversification does not guarantee a profit or protect from loss
We believe real assets could offer inflation-linked income potential, as some income streams of real asset companies are often connected to inflation
Real assets reacted positively to inflation during times in which inflation was surprisingly on the upside or trending up
In our view adding real assets to a more traditional bond/equity portfolio might help to increase diversification*
We believe including more real assets sectors could help enhance the overall risk-return profile of a portfolio, compared to investing in a single real asset component
* Diversification does not guarantee a profit or protect against a loss
While the relationship between inflation and hedge funds is not intuitive, there is statistical correlation between them.
During periods of major shifts in inflation, hedge fund managers can seek to tactically trade inflation and actively hold assets linked to inflation.
While “bad inflation” can be a difficult force to deal with, hedge funds’ positive and dynamic inflation exposures could be attractive in inflationary backdrops.
Given the wide dispersion in the hedge fund universe, strategy selection but also manager selection are key.
