Investors Favor Hedge Funds, Multi-Strat as Private Credit Cools

At an investor conference on Thursday, UBS Global Wealth Management co-presidents Iqbal Khan and Robert Karofsky said clients are shifting allocations within alternative investments, increasing exposure to hedge funds and multi-strategy products and reducing appetite for private credit.

Karofsky said overall client sentiment remains constructive despite geopolitical tensions and episodes of market volatility. He noted investors continue to participate in markets while taking a measured approach to risk and that markets appear to be pricing in some easing of Middle East-related tensions.

Khan said demand across alternatives is robust but moving between strategies rather than expanding uniformly. He said private equity continues to receive strong support, while flows have tilted toward more liquid or diversified strategies such as hedge funds and multi-strategy vehicles and away from private credit.

Private credit saw rapid fundraising in prior years. In recent months parts of the sector have experienced higher redemption activity and fund outflows, raising questions about liquidity and valuation processes in private markets. Swiss manager Partners Group recently introduced redemption limits on one of its funds after a rise in withdrawal requests.

UBS, which allocates to private markets and distributes alternative products to institutional and high-net-worth clients, said it is monitoring the shift in demand. The bank has previously reported limited direct balance-sheet exposure to private credit. Karofsky described overall client activity as healthy even as investors exercise caution.