Volatility will test the ability of alternative investment managers to perform in tough markets, according to a report from Standard & Poor's (S&P).
The report notes that investors may be suspicious of the success of some hedge fund managers who have managed to perform well in a bull market where volatility has fallen.
"How much of the returns of top-performing managers have been achieved using beta strategies that, by rights, should not have substantial fees attached to them," the report said.
S&P notes that hedge fund managers who have struggled to perform during this period may in fact by "true to label".
"The upcoming environment should provide investors with better opportunities to gauge the success of managers claiming skill in managing alternative mandates," the report said.
S&P director of investment consulting Simon Ibbetson warned that turbulence in the markets will continue.
"Given the range of uncertainties in the equity market, and the ongoing problems in the credit markets, it would seem likely that volatility will not return to the low levels seen in recent years," he said.
