Steven Grabowski, Co-Head of Capital Introduction
2026 is off to quite an interesting start with all that is going on in geopolitics and world energy and financial markets. When there is an increase in uncertainty, successful long-term investors stay focused on their long-term strategy but also take advantage of rebalancing and new investment opportunities that may present themselves.
It has already been a volatile start for equity and energy markets this calendar year so far (mid-March). Volatility, as measured by the VIX index, is up nearly 50% from its level 6 months ago. We have seen spikes in the VIX to above 20 in 5 of the last 6 months. A VIX level between 20 and 30 indicates higher volatility and rising anxiety. To date, we have not seen the VIX rise about 30.
Volatility can ultimately be positive for a variety of hedge fund strategies and bottom-up stock pickers. The ability some managers have to dial in equity beta, add alpha through shorting, invest in less volatile securities like high-quality credit, and position their strategies to benefit from volatility or rising energy prices allows them to show the value of their approaches. However, when there is a broad shift to risk-off in the markets, often there is less dispersion than fundamental stock pickers would like. On the positive side, volatility does offer managers more attractive entry points as prices/valuations fall with the broad market.
With this backdrop, the alternatives industry kicked off 2026 with several well-attended conferences. Our firm and its representatives have been sponsors of and speakers at a wide range of events. We hosted a panel at one event and were joined by two industry veterans who spent most of their careers at well-known investment consulting firms. The panel discussed asset allocation in the current environment and their outlook for markets and asset classes. We also had representatives from our cap intro teams based in the U.S., London, and Singapore all in attendance for a large investor conference in Maimi at the end of February. Our European and Asian colleagues are seeing similar themes in their respective markets.
Overall, there is significant renewed interest in hedge funds generally. Many investors with whom we speak desire to right-size their allocations to private investments – no longer re-upping with every private manager and looking to reallocate funds to hedge funds and long-only equities and fixed income. The interest from investors comprises a wide range of strategies and roles in the portfolio including long/short equity, credit, macro, volatility, multi-strategy, etc.
We have confidence that hedge fund managers who have shown the ability to add value and navigate volatile periods will continue to see interest and investments from a wide range of allocators. As we have seen from the data, there has been a rotation of institutional investor capital into hedge funds over the past year, and prolonged market volatility can be a tailwind for managers who navigate it well.
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After another interesting start in the equity markets to the calendar year, hedge funds remain in focus for many institutional investors.
2026 is off to quite an interesting start with all that is going on in geopolitics and world energy and financial markets. When there is an increase in uncertainty, successful long-term investors stay focused on their long-term strategy but also take advantage of rebalancing and new investment opportunities that may present themselves.
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