Private Equity To Hedge Funds

Investors are favoring hedge funds over reinvesting in private equity after closing deals, as M&A activity has slowed in recent years, according to BNP Paribas.

“The markets have transitioned from a pre-inflationary world where everything was rising. Rates were low, stocks were soaring, and investors moved away from active management in favor of passive management,” said Marlin Naidoo, Global Head of Capital Introduction at BNP Paribas in London.

The type of deals private equity relies on to generate returns has not made a comeback. Global private equity and venture capital transactions totaled $35.28 billion in January, a decline of $70 million compared to January 2024, according to a report by S&P Global Market Intelligence published last week.

Investors surveyed by BNP Paribas reported adding a net total of $22.2 billion in assets to their portfolios. Nearly one-fifth of last year’s hedge fund inflows came from private equity investors. Investors have also moved away from long-only equity and long-only bond investments in favor of hedge funds.

About two-thirds of the 290 investors surveyed said they would increase their allocations to hedge funds.