As with the previous quarter, valuations of traditional assets remain high, particularly global bonds. We have seen a sustained pick up in inflation over the last few months and there is much uncertainty around central bank policy action as we look ahead into 2022. Inflation could well be rising faster and spreading across economies based on recent data, which might in turn lead to faster tapering and rate hikes even in the US and Europe. It is difficult to predict with various cross-currents but we expect volatility across most asset classes to increase into next year.
We continue to believe that hedge funds are a compelling investment across a variety of strategies. Equity focused hedge funds continue to benefit from disruption in specific sectors, such as healthcare, technology or utilities; macro hedge funds can generate asymmetric returns with the use of options; and relative value hedge funds can generate fixed income type returns without taking duration risk. Thematic investments, including commodities and energy transition strategies offer significant returns if one can identify the right managers. Private credit continues to fill the void in credit markets with a large differential in returns to traditional credit assets.