UK financial advisor and broker Chartwell has warned investors to take a closer look at the asset classes included in diversified funds, with correlation growing between hedge funds and equity markets.

This correlation has increased as hedge funds have moved from macro to equity in recent years.

Chartwell said fund managers were finding it increasingly difficult to obtain exposure to quality hedge funds that could provide adequate liquidity for investors.

Graham Duce, the Credit Suisse manager of Chartwell’s strategic growth fund, said: “As our aim is low correlation to produce steady returns, we have reduced our exposure to hedge funds over the last 12 months. We have been looking for greater exposure to alternative asset classes such as water, as well as infrastructure and soft commodities, which are benefiting from the development of emerging market economies.”