For years, the climate for hedge funds was tough. Volatility was low. The price of everything was going up. It wasn’t that hard to make money. In that type of environment, why think outside the box?
But as central banks continue with their aggressive campaign of interest rate hikes aimed at bringing down inflation, sending markets on a roller coaster ride, alternative strategies are getting another look.
“Certain hedge fund strategies can perform well in volatile and sideways-moving markets, an environment we expect to last into next year,” Mark Haefele, chief investment officer at UBS Global Wealth Management, told clients on Tuesday.
On the heels of a summertime rally, markets have started to churn again. Concerns have ramped up ahead of the Federal Reserve meeting on Tuesday and Wednesday, at which the only debate will be over how much to hike rates.
The S&P 500 just logged its worst week since June. Government bonds are also experiencing a steep sell-off. The yield on the benchmark 10-year US Treasury, which moves opposite prices, reached its highest in more than a decade on Monday.
No matter what the Fed announces tomorrow, uncertainty is likely to linger, given the central bank’s emphasis that it intends to keep making decisions on a meeting-by-meeting basis.

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