Asian investors boost hedge fund allocations as bonds lose appeal

Asian investors are increasingly directing funds towards hedge funds as bond markets exhibit heightened volatility and equities face concentration risks, according to a Reuters report. Swiss private bank UBP has observed a more than tripling of hedge-fund-only mandates among its Asia-based discretionary portfolio management clients since the end of 2024, as investors scrutinize the diversification benefits of conventional stock and bond portfolios.

Global hedge fund assets hit $5.6tn in the second quarter of 2026, following a record $409bn increase in a single quarter, as per Hedge Fund Research (HFR). HFR's global hedge fund index delivered a 12.4% return in 2025, its strongest performance since 2009, and has gained an additional 7% year-to-date. In contrast, global equities have ascended by around 36% since the end of 2024, while government bonds have slipped by 7%.

Indonesia's sovereign wealth fund Danantara aims to allocate 5% to hedge funds to achieve more stable returns and mitigate drawdowns, while some previously non-participating institutional investors are contemplating exposures of approximately 10%, as indicated by Marsh. The surge in demand is notably pronounced for multi-strategy, macro, and quantitative managers that offer low correlations to conventional markets.

Japanese pension funds, family offices, and private wealth clients are among the entities bolstering their interest. The divergence between AI-driven winners and losers, coupled with geopolitical uncertainty, is also opening up prospects for long-short equity managers. Acadian Asset Management, managing around $233bn, has witnessed its Asian assets quadruple over four years.

CEO Kelly Young reported that investor interest is at its most robust level in two decades. J.P. Morgan Private Bank noted that hedge funds are increasingly perceived as strategic portfolio allocations rather than tactical investments, signaling a broader trend towards diversification beyond traditional equities and bonds.