As bond market volatility intensifies and stock markets remain turbulent, Asian pension funds, family offices and other investors are turning their attention to alternative assets, according to Zhitong Finance App.
Private bankers and asset allocation institutions say Asian investors are increasingly seeking asset diversification rather than remaining confined to traditional stock and bond allocations. This trend is placing new pressure on long-only managers, whose performance is already under scrutiny due to market volatility, while also casting doubt on the traditional 60/40 stock-bond allocation strategy.
Asian Capital Seeks New Safe Haven: Hedge Funds Gain Favor
According to Hedge Fund Research (HFR) data, global hedge fund assets increased by $409 billion to $5.6 trillion in the second quarter of 2026, marking the largest quarterly increase on record. Swiss private bank UBP said that since the end of 2024, the share of hedge fund-only mandates among its Asian discretionary portfolio management clients has more than tripled, though it did not provide specific figures. "Over the past few years, US Treasuries and government bonds have become less reliable diversification tools," said Paras Gupta, Head of Discretionary Portfolio Management for Asia at UBP, adding that this has expanded the role of hedge funds in portfolios.
Hedge funds have also performed relatively well, while the bond market has experienced a prolonged downturn over the same period. Safe assets that were supposed to preserve value have instead become a source of losses in portfolios. The global hedge fund index tracked by HFR rose 12.4% in 2025, posting positive returns for a third consecutive year and marking its best performance since 2009. The index has gained another 7% year-to-date. Since the end of 2024, global equities as measured by the MSCI World Index have risen about 36%, while the FTSE World Government Bond Total Return Index has fallen 7%. "We do want to increase our allocation to alternative asset classes," said Rani Piputri, Senior Director of Public Investments at Danantara Investment Management, the sovereign wealth fund of Indonesia. The institution aims to reach a 5% hedge fund exposure. "Because we want to achieve stable returns and minimize drawdowns."
New Investors Enter, Hedge Funds Become a "Supplement" to Traditional Portfolios
Niall O'Sullivan, Global Chief Investment Officer at strategic consultancy Marsh, said some institutional investors that had not previously ventured into hedge funds now want around 10% exposure, particularly multi-strategy funds with low correlation to the broader market. Adeline Tan, Head of Investments for Asia at Marsh, said wealth management firms, family offices and large investors, including Japanese fixed-income pension funds, have shown interest because of concerns over the poor performance of bonds as a risk diversification tool. Investors also believe that extreme divergence — whether the market split between AI winners and losers, or market fragmentation caused by geopolitical rifts — creates opportunities for long-short hedge funds to profit from price spreads. "Within the tech sector, semiconductors are outperforming software... the US is outperforming the rest of the world," said Daryl Ho, Senior Investment Strategist at DBS Bank. Albert Yang, Head of Alternative Investments for Asia at JPMorgan Private Bank, said hedge funds are increasingly being used as long-term allocations to manage volatility, noting growing concerns about AI concentration risk.
Of course, performance and fund flows within the hedge fund industry are clearly divergent. Yang said that increasing hedge fund allocations is not about replacing traditional portfolios, but rather supplementing them by enhancing portfolio resilience through new strategies. Flexible multi-strategy, macro and quantitative managers capable of generating returns independent of stock market direction are among the biggest beneficiaries. Acadian Asset Management, a $233 billion systematic fund that collects data on tens of thousands of companies and runs strategies designed to modestly but consistently outperform stock indices, has seen its assets in Asia quadruple over four years. "We believe we have never seen such heightened attention in 20 years," said Kelly Young, CEO of Acadian.
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