The highest inflation in 30 years is driving investors out of cash, fixed income, and passive equity in favour of Alternative Investments, specifically Private Equity and Venture Capital.
Source: Barclays Strategic Consulting Survey results
We highlighted in a previous blog post that Private market funds that invest through periods of distress and dislocation perform the best, so investors are seeing these funds as a great way to park their capital and weather the coming economic storm.
Whereas inflation erodes the value of cash and fixed income investments, it tends to impact favourably on asset prices, with private market funds therefore providing a degree of inflationary hedge in that respect.
Survey results from Barclays, show that individual investors are increasing their allocations mostly to private equity and venture capital funds, followed by Hedge Funds. Real estate and Infrastructure have tended to benefit from inflation the most in the past, but concerns over fully priced real assets as interest rates rise are likely to have reduced appetite for these funds from investors.