In its quarterly ML Alternative Ucits Barometer, the firm surveyed a wide range of active investors in alternative investments and asked questions aimed at discovering their forthcoming strategy.
Its findings showed that in the forthcoming quarter only 22% of investors planned to increase their exposure to global long short funds, compared to 50% at the start of the year.
ML Capital said: "Demand for all the key equity hedge fund strategies has taken a big hit as the patience of investors is in short supply at present."
For UK long short funds only 6% said they planned to raise exposure, down from 15% at the start of the year and almost 25% at the start of Q2.
Meanwhile, ML found allocations to CTAs (or managed futures funds) and global-macro strategies are set to keep growing, with around 60% of respondents looking to up their exposure before the end of the year.
John Lowry, co-founder and chairman of ML Capital, said: "During this quarter, where respondents’ allocations to Ucits rose dramatically from £10-£30bn, the increase in market volatility has seen a big shift towards those strategies that offer the potential to make money, or at least protect a significant element of the markets’ risk."
CTAs, which deal in highly liquid instruments such as futures, options and foreign exchange, have been praised in the past for their low correlation to other asset classes.
According to the Financial Times, AlphaMetrix Alternative Invesment Advisers, a Chicago-based research company, and the CME group did a study on the returns provided by CTAs over the 15 worst quarters for equities since 1987.
The study found that in 12 of the 15 quarters the BarclayHedge BTOP 50, an index of managed futures funds, posted positive returns.
In addition, while CTAs typically underperformed markets in bull periods, they have a positive correlation with equities on the upside and a negative correlation with them on the downside, so are good for portfolio diversification.
