Hedge funds are a top draw in Asia as investors look beyond bonds

Hedge funds are attracting significant attention in Asia as investors seek alternative investments amid market volatility. Japanese pensions and Indonesia's sovereign wealth fund are among those expanding their exposure to hedge funds. Private bankers and asset managers report a growing demand for diversification away from traditional equities and bonds.

Hedge fund assets reached a record quarterly increase of $409 billion, reaching $5.6 trillion in the second quarter of 2026, according to HFR data. UBP's Asia-based discretionary portfolio management clients have seen a more than threefold increase in hedge-fund-only mandates since late 2024. Hedge funds have outperformed traditional assets as bonds have become a less reliable diversifier.

UBP's head of discretionary portfolio management Asia, Paras Gupta, noted that hedge funds have become more crucial in portfolios due to the wobbly equities market. Hedge fund performance has remained stable despite the poor bond market conditions, contributing to a 12.4% gain in the global hedge fund index in 2025, up 7% year-to-date.

Asian investors are targeting a roughly 10% exposure to hedge funds, particularly multi-strategy funds with low correlation to broader markets. The trend is driven by concerns over concentration risk in AI and a desire for stable returns with minimal volatility drawdowns.