Key Takeaways
- • Hedge funds delivered positive returns across all major strategies in 2025, with equity long/short, merger arbitrage, discretionary macro, and multi-strategy funds proving most resilient during volatile periods and outperforming traditional 60/40 portfolios through active risk management.
- • Private equity deal flow increased 14.5% through September 2025 according to PitchBook data, with exit activity accelerating as central banks eased monetary policy, signaling gradual recovery in PE activity despite muted overall returns.
- • Private credit direct lending maintained strong yields of approximately 4.5% in US dollars during the first half of 2025 (Cliffwater Direct Lending Index), with low default rates and robust fundraising despite isolated corporate bankruptcies.
- • Swiss investors should maintain meaningful international allocations to alternative investments—hedge funds, private equity, private credit, and infrastructure—in 2026 to improve portfolio diversification, stabilize returns, and mitigate currency and geopolitical risks.
- • Alternative investments are positioned as strategic portfolio components rather than tactical overlays, offering essential resilience in an environment characterized by zero interest rates, foreign uncertainty, and currency headwinds.
Summary
Swiss investors navigated a challenging macroeconomic backdrop in 2025 defined by zero interest rates, geopolitical uncertainty, and a persistently strong Swiss franc. While the domestic investment case appeared straightforward, international allocations to alternative assets—including hedge funds, private equity, private credit, and infrastructure—proved instrumental in building resilient, diversified portfolios capable of weathering market volatility. According to UBS's 2026 outlook, this strategic role for alternative investments is expected to persist into the new year.
The hedge fund asset class demonstrated particular strength throughout 2025. All major hedge fund strategies posted positive returns, with specific success in equity long/short funds, merger arbitrage strategies, discretionary macro approaches, and multi-strategy vehicles. These strategies provided meaningful downside protection during periods of elevated volatility while generating active returns that supplemented gains from equity rallies. In comparative terms, hedge fund performance enhanced overall portfolio outcomes relative to traditional 60/40 balanced allocations, reinforcing their value as risk-management tools within institutional and high-net-worth portfolios.
Private equity activity gradually accelerated through 2025, though returns remained modest and positive. Deal flow—a key indicator of available investment opportunities for PE managers—expanded 14.5% through September 2025, according to PitchBook data. Notably, exit opportunities improved as central banks shifted toward monetary easing, enabling managers to realize investments and return capital to investors more efficiently. Private credit exhibited exceptional resilience, with direct lending strategies delivering approximately 4.5% returns in US dollars during the first half of 2025, per the Cliffwater Direct Lending Index. Despite isolated headline-generating corporate bankruptcies, default rates remained subdued, and fundraising activity remained robust, indicating strong investor appetite for the asset class.
For Swiss investors and institutional allocators broadly, UBS maintains that alternative investments will continue to serve a critical portfolio function in 2026. The combination of diversification benefits, enhanced risk-adjusted returns, and stabilization during market dislocations positions alternatives as strategic holdings rather than cyclical tactical additions. This outlook reflects confidence that the favorable conditions observed across hedge funds, private equity, and private credit in 2025 will persist, supporting continued allocation to these asset classes as Swiss investors manage currency exposure, geopolitical risks, and the structural challenges of a low-rate environment.
The hedge fund asset class demonstrated particular strength throughout 2025. All major hedge fund strategies posted positive returns, with specific success in equity long/short funds, merger arbitrage strategies, discretionary macro approaches, and multi-strategy vehicles. These strategies provided meaningful downside protection during periods of elevated volatility while generating active returns that supplemented gains from equity rallies. In comparative terms, hedge fund performance enhanced overall portfolio outcomes relative to traditional 60/40 balanced allocations, reinforcing their value as risk-management tools within institutional and high-net-worth portfolios.
Private equity activity gradually accelerated through 2025, though returns remained modest and positive. Deal flow—a key indicator of available investment opportunities for PE managers—expanded 14.5% through September 2025, according to PitchBook data. Notably, exit opportunities improved as central banks shifted toward monetary easing, enabling managers to realize investments and return capital to investors more efficiently. Private credit exhibited exceptional resilience, with direct lending strategies delivering approximately 4.5% returns in US dollars during the first half of 2025, per the Cliffwater Direct Lending Index. Despite isolated headline-generating corporate bankruptcies, default rates remained subdued, and fundraising activity remained robust, indicating strong investor appetite for the asset class.
For Swiss investors and institutional allocators broadly, UBS maintains that alternative investments will continue to serve a critical portfolio function in 2026. The combination of diversification benefits, enhanced risk-adjusted returns, and stabilization during market dislocations positions alternatives as strategic holdings rather than cyclical tactical additions. This outlook reflects confidence that the favorable conditions observed across hedge funds, private equity, and private credit in 2025 will persist, supporting continued allocation to these asset classes as Swiss investors manage currency exposure, geopolitical risks, and the structural challenges of a low-rate environment.
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