Global allocators are once again paying closer attention to multi-strategy and multi-manager hedge fund solutions. But unlike the years before the financial crisis, the attraction today is less about chasing outsized returns and more about diversification, implementation efficiency and access to stable alpha streams.
Few firms have a clearer view into those trends than Global Fund Search. Founded in 2012, the Copenhagen-based platform works with institutional investors running manager searches across traditional and alternative asset classes. Its client base spans pension funds, wealth managers and other allocators, while asset managers use the platform to gain visibility with investors. That position gives the firm insight into both sides of the market. “We’re definitely seeing quite a few of the multi-strategy searches or allocations,” says Kasper Steen Andersen, founder and CEO of Global Fund Search. “It’s much more common than the traditional directional equity long-short type of searches.”
“We’re definitely seeing quite a few of the multi-strategy searches or allocations. It’s much more common than the traditional directional equity long-short type of searches.”
Kasper Steen Andersen, founder and CEO of Global Fund Search.
According to Andersen, allocators increasingly view multi-strategy solutions as a way to gain exposure to low-correlation return streams without having to build and oversee large hedge fund portfolios internally. “Investors like the idea of having someone pick the right components throughout the cycles,” he says. “It is not just alpha generation. To some extent it is also outsourcing the CIO role or the fund selection role for niche buckets of the portfolio.”
“It is not just alpha generation. To some extent it is also outsourcing the CIO role or the fund selection role for niche buckets of the portfolio.”
Kasper Steen Andersen, founder and CEO of Global Fund Search.
That shift reflects broader changes in institutional portfolios over the past decade. Andersen argues that the biggest development since Global Fund Search launched in 2012 has not been within hedge funds themselves, but the rapid rise of private markets allocations. “The big shift has been towards private markets,” he says. “That has taken up a lot of resources, costs and administration within investment organizations.”
As pension funds and other allocators expanded private equity, private credit and infrastructure exposure, liquid alternatives often became a smaller relative allocation within portfolios. In Europe especially, dedicated hedge fund teams remain relatively uncommon outside the largest institutions. “In Europe we rarely see dedicated hedge fund allocators,” Andersen says. “Usually they wear several hats. They might oversee equities, fixed income and liquid alternatives at the same time.”
That dynamic has increased the appeal of outsourcing parts of the hedge fund allocation process to external managers or multi-strategy platforms. Operational simplicity also plays a role. Andersen notes that private markets consume a growing share of administrative resources inside institutional investment teams, leaving fewer resources dedicated to liquid alternatives. “Hedge funds have in some ways been squeezed in that dynamic,” he says. “Having solutions where management is outsourced or easier to implement definitely has a role.”
At the same time, some allocators have become more cautious about illiquidity after years of expanding private markets exposure. “The liquidity profile of private markets turned out to be terrible for some investors,” Andersen says. “That made them return a bit to some of the liquid stuff again.”
“The liquidity profile of private markets turned out to be terrible for some investors. That made them return a bit to some of the liquid stuff again.”
Kasper Steen Andersen, founder and CEO of Global Fund Search.
For Andersen, the renewed interest in liquid alternatives is closely tied to portfolio construction rather than return maximization alone. Multi-strategy portfolios are increasingly viewed as a replacement for part of the traditional fixed income allocation. “They see it as a small alpha component with low risk and low volatility,” he says. “If done right, it can really replace some of the traditional fixed income exposure.” What stands out to him is not necessarily headline performance, but the consistency of returns. “The returns themselves may not be hugely impressive,” Andersen says. “Maybe six, seven or eight percent. But when you combine that with Sharpe ratios of two or higher, then it becomes interesting.”
He also notes that sophisticated multi-strategy managers have generally become better at dynamically balancing exposures across underlying strategies. “They seem to be very good at finding the balance between strategies and adjusting risk over time,” he says. Still, memories from the financial crisis continue to influence allocator behaviour, particularly in the Nordics. Andersen recalls that many investors became disillusioned with hedge funds after 2008, especially when supposedly diversified or liquid portfolios failed to behave as expected. “Many hedge funds did not deliver what they were supposed to do,” he says. Some became illiquid or gated. Equity long-short managers turned out to be much more long-biased than investors expected.
That disappointment partly explains why private markets gained so much momentum during the following decade. Yet Andersen believes institutions are now rediscovering the need for genuinely liquid diversifiers. “Investors found out that private equity was not necessarily the diversifier they thought it was,” he says. “So the focus on liquid alternatives as a risk diversifier came back.”
“Investors found out that private equity was not necessarily the diversifier they thought it was. So the focus on liquid alternatives as a risk diversifier came back.”
Kasper Steen Andersen, founder and CEO of Global Fund Search.
While multi-strategy demand has increased, Andersen notes that the Nordic market for dedicated fund-of-funds remains relatively small compared with some continental European markets. “Germany has a bigger fund-of-funds culture,” he says. “But often those structures are driven by banks selling portfolio solutions built around their own products.” In the Nordics, truly independent multi-manager firms are fewer in number, although hedge fund allocations remain present across institutional portfolios.
On the manager side, Andersen says many firms continue to use Global Fund Search primarily as a search and distribution framework rather than as a full advisory service. Institutional clients typically approach the platform seeking broad market coverage and efficient screening processes. “The classic client is still the pension fund with a relatively small team,” he says. “They come to us and say, ‘please give us the long list and then we will take it from there.’” Managers, meanwhile, tend to be more focused on understanding investor demand and positioning. “They ask about fee structures, terms, strategy demand and where we see traction,” Andersen says. “They want to understand where the market is going.”
“Nobody wants to take risk on emerging managers. Even if somebody has very good returns, institutions still worry whether it is repeatable and whether the setup is institutional enough.”
Kasper Steen Andersen, founder and CEO of Global Fund Search.
One area where allocators remain cautious is emerging managers. Despite strong performance from some younger hedge funds, institutional investors still prefer established platforms with longer track records and operational infrastructure. “Nobody wants to take risk on emerging managers,” Andersen says. “Even if somebody has very good returns, institutions still worry whether it is repeatable and whether the setup is institutional enough.”
Access constraints also continue to shape the market. Top-performing multi-strategy firms often close to new capital, leaving some allocators unable to gain direct exposure. “Some managers are simply very difficult to get into,” Andersen says. “And if they are successful, they attract even more capital.” That creates an ongoing balancing act between scale and capacity. While allocators increasingly consolidate capital with fewer managers, successful hedge fund strategies can become harder to scale without diluting returns.
