Key facts
- Asian investors are increasingly seeking asset diversification beyond traditional equities and bonds.
- Global hedge fund assets rose $409 billion to $5.6 trillion in the second quarter of 2026.
- UBP has seen the share of hedge-fund-only mandates among its Asia-based clients more than triple since end-2024.
- A global hedge fund index gained 12.4% in 2025 and is up 7% year-to-date.
- DBS Bank notes opportunities for long-short hedge funds due to market bifurcation.
- Acadian Asset Management has seen its assets in Asia quadruple in four years.
Hedge funds are attracting significant capital from Asian investors, including pensions and family offices, as they seek diversification and ways to navigate volatile markets. Traditional long-only managers are facing increased scrutiny due to market volatility, prompting a re-evaluation of the standard 60/40 stock and bond allocation strategy.
Global hedge fund assets saw a record quarterly increase of $409 billion in the second quarter of 2026, bringing the total to $5.6 trillion, according to Hedge Fund Research (HFR). At UBP, a Swiss private bank, the proportion of hedge-fund-only mandates among its Asia-based discretionary portfolio management clients has more than tripled since the end of 2024.
Paras Gupta, head of discretionary portfolio management Asia at UBP, noted that US Treasuries and government bonds have become less reliable diversifiers in recent years, expanding the role hedge funds can play. Hedge funds have also demonstrated relatively strong performance, with a global index tracked by HFR gaining 12.4% in 2025 and an additional 7% year-to-date, marking their third consecutive positive year.
In comparison, global stocks measured by the MSCI world index have risen approximately 36% since the end of 2024, while the FTSE world government bond total return index has declined by 7% over the same period.
Rani Piputri, senior director of public investment at Indonesia's sovereign wealth fund Danantara Investment Management, stated the fund is aiming for a 5% hedge fund exposure to achieve stable returns with minimal drawdown. Niall O’Sullivan, global chief investment officer at strategic adviser Marsh, observed that some institutional investors previously not using hedge funds are now seeking around a 10% allocation, particularly to multi-strategy funds with low correlation to broader markets.
Adeline Tan, head of investments at Marsh Asia, highlighted that interest stems from wealth managers, family offices, and large investors like Japan's defined-benefit pensions, who are particularly concerned about bonds' poor performance as a diversifier. Investors also see opportunities for long-short hedge funds to profit from price discrepancies driven by market bifurcation, such as the split between AI winners and losers or geopolitical divisions.
Daryl Ho, senior investment strategist at DBS Bank, pointed out that within the tech sector, semiconductors are outperforming software, and the US is outperforming the rest of the world. Albert Yang, head of Alternative Investments for Asia at J.P. Morgan Private Bank, noted that hedge funds are increasingly being used for long-term allocation to manage volatility, especially with growing concerns about concentration risk in AI.
Yang also clarified that the increased allocation to hedge funds is not replacing traditional portfolios but complementing them with new strategies and resilience. Multi-strategy, macro, and quantitative managers have been significant beneficiaries due to their agility and ability to generate returns independent of equity market direction. Acadian Asset Management, a systematic fund managing $233 billion, has seen its assets in Asia quadruple in four years, with CEO Kelly Young remarking on the unprecedented level of interest not seen in two decades.