LONDON, Feb 13 (Reuters) - Investors are choosing hedge

funds rather than re-upping their private equity investments

after closed deals, as deal making in recent years has dried up,

said BNP Paribas.

WHY IT'S IMPORTANT

Large institutions have become wary of a souring in public

markets as they seek to put their money into the hands of

people that trade in a way that is either contrary to broader

markets, or less exposed to their swings.

KEY QUOTES

"Markets have gone from this pre-inflation world where

everything was rising. Rates were low, stocks soared and

investors dropped active management for passive," said Marlin

Naidoo, global head of capital introduction at BNP Paribas in

London.

This was a sign that investors were shifting back towards

active management, Naidoo said.

CONTEXT

In 2022 and 2023, investors yanked $52 billion from top

performing hedge funds. While it is not unusual to ditch low

performing hedge funds, this exodus was driven by pension funds

and universities sacrificing their strongest investments to hold

on to private equity and venture capital portfolios which at

that time were beginning to cost more than they yield.

The kind of deal making private equity relies on to see bets

pay off, has not returned. Global private equity and venture

capital transactions totaled $35.28 billion in January, down $70

million from January 2024, according to a S&P Global Market

Intelligence report last week.

BY THE NUMBERS

Investors surveyed by BNP Paribas said they added a net

$22.2 billion of assets to their portfolios.

Almost a fifth flowed that into hedge funds last year

was from private equity investors. Investors also ditched long

only equity and long only bond investments for hedge funds.

WHAT'S NEXT

Roughly two thirds of the 290 investors surveyed said they

would increase their hedge fund allocations.

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