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

Asian pensions, family offices and other investors are increasingly turning to hedge funds to diversify away from traditional equity and bond allocations, according to a Reuters report datelined Hong Kong on October 13, 2026. Private bankers and asset allocators told Reuters that the shift reflects concern over volatile debt markets and uneven equity performance, and it adds pressure on traditional long-only managers whose returns have drawn scrutiny.

HFR data cited by Reuters show global hedge fund assets grew by a record amount for any quarter in the second quarter of 2026, rising $409 billion to $5.6 trillion. The HFR global hedge fund index gained 12.4% in 2025, its third consecutive positive year and its best performance since 2009, and is up a further 7% year-to-date. Over the same period since end-2024, the MSCI World index has gained about 36% while the FTSE World Government Bond Total Return index has fallen 7%, weakening the case for government bonds as a portfolio diversifier.

UBP said the share of hedge-fund-only mandates among its Asia-based discretionary portfolio management clients has more than tripled since end-2024, though it did not provide figures. Paras Gupta, head of discretionary portfolio management Asia at UBP, said US Treasuries and government bonds have become a less reliable diversifier over recent years. Rani Piputri, senior director of public investment at Danantara Investment Management, part of Indonesia's sovereign wealth fund, said the fund wants more exposure to alternatives for stable returns with minimal drawdown and is aiming for 5% in hedge funds.

Marsh's global CIO Niall O'Sullivan said some institutional investors that previously avoided hedge funds now want roughly 10% exposure, particularly to multi-strategy funds with low correlation to broader markets. Adeline Tan, head of investments at Marsh Asia, said interest is coming from wealth managers, family offices and large investors including Japanese defined-benefit pensions, for whom bonds' weak diversification has been a particular concern. Daryl Ho of DBS Bank cited market bifurcation, including semiconductors outperforming software and the US outperforming the rest of the world, as an opportunity for long-short funds. Albert Yang of J.P. Morgan Private Bank said hedge funds are increasingly used as long-term allocations to manage volatility and concentration risk tied to AI, while not replacing traditional portfolios.

Reuters notes that performance across the hedge fund industry is widely dispersed. Multi-strategy, macro and quantitative managers that can generate returns independent of equity market direction have been among the largest beneficiaries. Acadian Asset Management, a $233 billion systematic manager, has seen its Asia assets quadruple in four years, and CEO Kelly Young said, "It's been 20 years since we think we've seen this level of interest."