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Bailey McCann, Opalesque New York:

Hedge funds are playing a bigger role in investor portfolios than they have in a decade. That's likely to continue as macroeconomic trends create a market environment that is favorable to active management.

"Long-term asset allocation and diversification frameworks designed for the last decade are not fit for purpose in this new moment," writes Michael Pyle, deputy head of the Portfolio Management Group at BlackRock in his latest hedge fund outlook. Hedge funds can play a central role in adapting to today's environment."

He notes that classical diversifiers like government bonds may be less reliable going forward. That reality is likely to push more investors into opportunistic strategies and active management.

Allocators are making greater use of portable-alpha overlays and separately managed accounts (SMAs) to implement hedge fund exposures, the outlook says. BlackRock says these structures free up capacity and preserve strategic beta exposures, the overall result gives institutional portfolios more options when it comes to setting up or expanding their hedge fund exposure.

At the strategy level, BlackRock argues that systematic multi-strategy funds may have a bit of an edge as fragmentation increases. Global markets are no longer moving in lockstep and it remains to be seen what the full impact of American isolationism and tariff policy will be. Systematic strategies are designed to use that fragmen......................

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