HSBC AM points to ‘resilience’ of alternatives
HSBC Asset Management has underlined the “valuable source of diversification and resilience” presented by alternative investments, as we enter a 12-month period likely to be characterised by volatility and unpredictability.
The firm’s 2025 Investment Outlook urged investors to be “active and agile” as we enter 2025 as, despite a move to lower inflation and resilient growth uncertainty around economic and trade policy has risen.
Inflationary pressures are set to become more entrenched and central banks may face difficult decisions ahead, balancing the need for economic support against the risk of fueling inflation further,” said HSBC Asset Management global chief investment officer Xavier Baraton. “In this dynamic environment, investors must remain alert to both opportunities and vulnerabilities, adapting strategies to address an increasingly complex global economic framework.”
Read more: HSBC AM makes key hire in growing venture debt business
However, the asset manager said portfolio resilience could be bolstered by incorporating alternatives.
The form pointed out that demand for private credit has remained robust despite falling interest rates, likely because it is unlikely that rates will return to the low levels of the past decade.
Private credit currently accounts for 6 per cent of US corporate lending, leaving it considerable potential for future growth in 2025, according to HSBC.
Opportunities also exist in private equity and real estate, the former benefiting particularly from the energy transition, on-shoring or near-shoring of supply chains, and the emergence of artificial intelligence.
Europe was marked out as best placed to lead an investment recovery due to limited development activity, values having reset relatively quickly, and interest rates beginning to fall.
Read more: S&P predicts “relief” for private markets in 2025
“As markets continue to navigate persistent volatility in 2025, alternative investments are emerging as a critical avenue for diversifying and strengthening portfolios. Private credit continues to attract strong demand, even amidst declining interest rates, and we believe the sector’s growth trajectory is poised to accelerate, offering significant opportunities for investors in the months ahead,” said HSBC Alternatives chief executive officer Joanna Munro.
“Private equity, despite recent headwinds, is showing signs of a recovery in transaction activity. We see opportunities within the lower mid-market segment, with transformative trends continuing to create compelling long-term opportunities. The real estate sector also offers promise, while rising confidence in private and listed real estate markets reflects growing optimism, as well as improving economic conditions. With greater macro and market volatility associated with elevated geo-political risk, we are constructive on the opportunity set for hedge funds for the next year.”
Read more: HSBC Asset Management launches NAV Financing Partnership Fund
