New York (HedgeCo.net) – With the possibility of rising interest rates domestically, interest rate volatility globally and greater volatility in the global equity markets, J.P. Morgan’s prime brokerage division is predicting there will be significant allocation changes in hedge fund portfolios.

A recent article on the Pension & Investments Magazine website cited the report and according to the article, J.P. Morgan is predicting that defined benefit executives in the U.S., Canada and the U.K. are “likely to move away from directionally oriented hedge fund strategies and to strategies with lower correlation, less volatility and minimal beta.”

The report goes on to predict that within the long/short strategies, defined benefit plans will move away from “directional hedge funds that have higher net long exposures and increase investment in low-beta/market-neutral equity strategies.”

What these allocation change predictions suggest is that defined benefit investment executives see the recent increase in equity volatility continuing and it suggest that they are expect the Fed to act sooner rather than later when it comes to raising interest rates.

Rick Pendergraft
Research Analyst
HedgeCoVest