Asset owners’ interest in alternatives reached a height in 2021 when a net of 45 per cent respondent said they are planning to increase allocations in the area. While the demand has been trending downwards in recent years, 2026 has hit a three-year low. 

Only a net of 9 per cent of respondents said they will allocate more to alternatives this year; however, the sub asset class breakdown tells a bifurcated story. 

While a net of 24 per cent of chief investment officers are looking to increase allocation in hedge funds and infrastructure and real assets and 22 per cent plans to invest more in private credit, a net of 7 per cent of respondents are looking to decrease allocation in real estate and venture capital, and 2 per cent plans to trim private equity. 

QIC state investment CIO Allison Hill says the sovereign investor is adding to both fund of fund and direct investment exposures in the hedge fund space. She is of the view that given diverging rate directions in central banks around the world and other aspects of the economy, it’s a fertile ground for active return opportunities across equities, bonds and currency. 

“We're really just thinking about, how do we add things to that segment of the portfolio that are differentiated to our current portfolio and really trying to give us access to different potential alpha streams, and in doing so, trying to create a little bit more resilience in the portfolio.”

Private credit (26 per cent) and private equity (15 per cent) have the largest net percentage of CIOs looking to increase manager relationships. Elmer Huh, CIO of the M.J. Murdock Charitable Trust notes the dynamics of manager performance in private equity and venture capital, to which the fund has a large exposure. 

“We know that PE has been very inconsistent in terms of top quartile performing managers, unlike the persistency in venture where once you find the top quartile manager, it's highly likely they will continue to repeat,” he says.

“So we're constantly in this mode of trying to look for what is the best lower middle market private equity manager, and we'll continue to look for them and slowly replace some of our old private equity with that new private equity. 

“We will allocate a certain amount each year, which may end up being more than what we have, just because we know that's where, if we get it right, that's where the alpha will come into play.”

In contrast, real estate has seen a net of 6 per cent respondents who are looking to cull the number of managers they work with.