Alex Schoenfeldt, Head of Investments at Lumyna, discusses the new swathe of high-quality funds coming to market, and what it means for investors
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Over the last few years of the interest rate cycle, both liquid alternatives and semi-liquid private market funds have served to broaden the toolkit available to investors when they’re seeking to build robust and attractive investment portfolios.
Liquid alternatives and liquid hedge funds provide the ability to generate absolute returns irrespective of the point in the economic cycle, while private market funds can provide investors with access to new assets and sources of return that aren’t available in the public markets.
What’s exciting as we near the end of this cycle is we see a strong pipeline of high-quality funds coming to market. When we look at this within the landscape of a higher interest rate environment and increasing macroeconomic divergences, those funds have the opportunity to generate attractive returns through active security selection.
Private markets have historically generated attractive returns with relatively low volatility. So, they’re both a return enhancer and a diversifier to hedge fund portfolios. It’s about having an uncorrelated source of alpha, but also a different source of beta through diversifying to private markets.
And for a traditional hedge fund investor, private markets open up a whole suite of potential new and complementary strategies that do this.
As a ‘long only’ asset class, the nature of those sorts of underlying assets provides the opportunity to generate a return premium, and that can either be through control in the sense of private equity or bespoke structuring – for example, with something like private credit. And that potentially provides a return that’s above that available in publicly traded securities.
Lumyna has been partnering with world-class alternatives managers to deliver innovative and differentiated investment funds since 2007. While the business initially focused on the alternative UCITS space, partnering with best-of-breed hedge fund managers, we have seen a significant level of interest in private market solutions over the last few years, and launched our first private markets product four years ago with US-based manager Adams Street.
We believe many investors are still under-allocated to private markets, despite there being significant investor appetite for these strategies and the benefits they can offer. One of the key barriers to capital deployment has been the shortage of investment vehicles providing access to the highest-quality managers within the right kind of structure that enables investors to easily incorporate these assets in their portfolios.
With the recent launch of the Lumyna AIF and RAIF umbrellas, we are able to expand our private markets footprint with a series of evergreen, semi-liquid funds, while offering the same level of service when it comes to origination, structuring, oversight, and distribution on which Lumyna was founded. The initial strategies that Lumyna plans to launch before the end of this year focus on opportunistic credit and parametric ILS. Further private market funds focused on credit, equity, and infrastructure are all under active consideration.
We don’t think we’ll see rates going back to the 0–1% level in the coming years. We’ll have a new equilibrium level of interest rates. And that’s really positive for investors because it provides a great base from which to generate better absolute returns because all risky assets should provide a premium above prevailing cash rates. Innovation will continue and so newer structures and access vehicles for private markets are for the long term because it just allows a broader range of investors to get access to these kinds of asset classes.
About
Alexander Schoenfeldt is Head of Investments at Lumyna. Alex is responsible for manager selection, as well as oversight of the internal investment function at the firm. He previously worked at the £20bn British Airways Pension Fund, where he was responsible for all external fund investments, with a focus on alternative assets.
This material is intended for professional and institutional investors only and is not intended to be directed at or made available to retail clients or US persons.
The information contained in this document is only for general information on products and services provided by Lumyna Investments Limited (Lumyna) and Generali Investments Luxembourg S.A (GIL), as Management Company. It shall under no circumstances constitute an offer, recommendation or solicitation to subscribe units/shares of undertakings for collective investment in transferable securities or an offer of investment services. It is not linked to nor is it intended to be the foundation of any contract or commitment. It shall not be considered as an explicit or implicit recommendation of any investment strategy or as investment advice. Neither Lumyna nor GIL accept responsibility for mistakes or omissions in this document and shall not be liable in respect of any damages or losses related to the improper use of the information provided herein.
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This article originally appeared in Preqin 2025 Global Report: Hedge Funds. The opinions and facts included in the above do not constitute investment advice. Professional advice should be sought before making any investment or other decisions. Preqin and Lumyna accept no liability for any decisions taken in relation to the above.