Interest in hedge funds is growing as investors look to avoid equity market risk, according to Zenith Investment Partners.
Zenith's head of alternative research, Daniel Liptak, told InvestorDaily that with hedge funds showing positive returns in the past six months, allocations to alternatives have increased.
"Hedge funds have been doing very well, probably in the last six or seven months," Mr Liptak said.
"We now have some reasonably large clients that have increased the allocations to alternatives - particularly in market neutral and long and short equities - as a real way of reducing equity market beta while still having equity exposure."
Mr Liptak said that a fund with a 50/50 split between equity and fixed income is still very exposed to the share market and could be at risk in a correction.
He added that macro factors such as low interest rates and the high price of bonds have also made many investors fearful of a bond bubble.
"The fear of a bump in the bond bubble and this hunt for yield is creating further distress for people who think returns are going to be nasty," Mr Liptak said.
"So, I think overall, most of the investors to date are showing some risk aversion to the long beta - and that is key.
"Long/short credit strategies or fixed income provides an opportunity for a balanced fund to reduce the risk out of the fixed income and equity spaces and it diversifies away that risk somewhat. It doesn't completely eliminate it of course but it does reduce the market beta."
