Asian investors increase hedge fund allocations

Asian institutional investors are increasing allocations to hedge funds as bond-market volatility and concentration risks in equities reduce the appeal of traditional stock-and-bond portfolios. Hedge-fund-only mandates among Asia-based discretionary portfolio management clients at Swiss private bank UBP have more than tripled since the end of 2024.

Demand is focused on strategies with lower correlations to public equity and bond markets. Multi-strategy, macro and quantitative managers are attracting interest from Japanese pension funds, family offices and private wealth clients.

Global hedge fund assets reached $5.6 trillion in the second quarter of 2026 after a record quarterly increase of $409 billion, according to Hedge Fund Research. Its global hedge fund index returned 12.4% in 2025, the strongest annual performance since 2009, and had gained a further 7% in 2026 by the second quarter.

Global equities had risen about 36% since the end of 2024, while government bonds had fallen 7% by the second quarter. A small group of technology and artificial intelligence-related companies accounted for a large share of equity-market gains during that period.

Indonesia’s sovereign wealth fund Danantara is targeting a 5% allocation to hedge funds to seek steadier returns and limit losses during market declines, according to Marsh. Some institutional investors that previously had no hedge-fund exposure are considering allocations of about 10%, the consulting firm reported.

Geopolitical uncertainty and wider differences between companies benefiting from artificial intelligence and those falling behind are creating opportunities for long-short equity managers. These funds take positions designed to profit from both rising and falling stock prices.

Acadian Asset Management, which oversees about $233 billion, has quadrupled its assets in Asia over the past four years. Chief Executive Officer Kelly Young described investor interest in the region as being at its highest level in two decades.

J.P. Morgan Private Bank reported that hedge funds are increasingly being treated as a strategic portfolio allocation rather than a short-term investment. The bank linked the change to efforts to diversify beyond conventional equity and fixed-income holdings.