Alternative asset classes have lost asset allocation share in recent months on the back of market volatility, but private equity is moving back into the spotlight, according to a new Scorpio Partnership report.

Half of surveyed professionals said that they are looking to invest in listed private equity over the next six month.

Andrea Lowe, executive director of LPEQ, a group of European equity firms that sponsored the survey, said that the need for higher returns is behind the change. She also said that upcoming regulatory changes are expected to enhance investor interest in listed private equity.

Twenty-six out of the 30 chief executives and senior investment professionals in the survey said that private equity is part of their strategies and liquidity is widely seen as its greatest strength. About one half of the respondents came from private banks and family offices.

Over the past two years alternatives have gone up from 7 per cent to one fifth of portfolio allocation.

No scramble for hedge funds

Not all alternatives have regained popularity, however: 20 per cent of respondents are looking to cut down on exposure to hedge funds in the next six months, while two-thirds said that allocation will stay the same. Exposure to hedge funds has declined from 58 per cent in the second quarter of this year to about 35 per cent in October and November when the survey was conducted.  

The survey also found that just under a third of respondents expect to decrease their holdings in gold over the next half-year period. The safe haven asset has been an intrinsic part of this year’s investment narrative and is currently trading at about $1,750/oz, up from $1,400/oz at the start of the year. Although at the end of August it climbed over $1,900/oz, it has not been above $1,800/oz since September.