Key Takeaways
- • Bank of America is recruiting a new illiquid fund-focused analyst to join its Chief Investment Office team, signaling expansion of its alternatives gatekeeper capabilities in a competitive talent market where key personnel have recently departed to rival firms.
- • Asset allocators surveyed by BofA plan to concentrate hedge fund investments in fewer, larger multi-strategy managers in 2026, with 62% of investors negotiating increased capacity rights in 2025 (up from 17% in 2024) and 51% planning to boost hedge fund allocations.
- • Average allocations per hedge fund rose to $50 million in 2025 from $42 million in 2024, while portfolio breadth contracted to an average of 18 hedge funds per allocator versus 20 in 2024, reflecting consolidation around top-performing managers.
- • Goldman Sachs, JPMorgan, and Bank of America have assembled basket products allowing hedge funds to short the $1.8 trillion private credit market, with BofA specifically offering baskets of European financial institutions with private credit exposure.
- • The hedge fund industry reached $5 trillion in assets during Q3 2025, driven by sustained strong performance that has fueled positive sentiment among allocators despite broader market caution.
Summary
Bank of America is actively recruiting specialized talent to strengthen its alternatives investment research division. Specifically, Merrill Lynch's Chief Investment Office is seeking an illiquid fund-focused analyst to join its gatekeeper team. This hiring initiative comes amid recent personnel transitions in the sector, most notably the March departure of Carolyn Bailey, a former BofA Merrill Lynch gatekeeper who joined Brown Advisory as an investment research professional. The recruitment effort underscores BofA's commitment to expanding its capacity to serve hedge fund managers and allocators during a period of significant industry consolidation.
Asset allocators are materially reshaping their hedge fund portfolios in 2026 based on BofA's survey of 280 institutional investors. The data reveals a clear preference for concentration: allocators maintained an average of 18 hedge funds per portfolio in 2025, down from 20 in 2024, while directing capital more aggressively to top-performing multi-strategy managers. This concentration strategy has accelerated dramatically, with 62% of surveyed investors negotiating expanded capacity rights in 2025, a near-fourfold increase from 17% in 2024. Vanessa Bogaardt, global head of capital introduction and prime financing at Bank of America, stated that "2025 marks a little bit of a turning point where sentiment and allocations have shifted positively, which signals an industry tailwind fueled by healthy performance over recent years."
Capital deployment patterns are intensifying around fewer relationships. Average allocations per fund increased from $42 million in 2024 to $50 million in 2025, reflecting both larger initial commitments and increased secondary allocations to existing positions. Approximately 51% of hedge fund investors plan to increase allocations in 2026, prioritizing hedge funds ahead of other alternative asset classes. The broader industry backdrop supports this reallocation, as hedge fund assets surpassed $5 trillion in Q3 2025, driven primarily by strong recent performance across multi-strategy and tactical strategies.
Concurrently, major investment banks have developed derivative products facilitating short exposure to private credit. Goldman Sachs, JPMorgan, and Bank of America have constructed baskets of listed equities with exposure to the $1.8 trillion private credit market. Goldman's offerings include indexes focused on European financial institutions and business development companies with private credit exposure, while JPMorgan's baskets encompass alternative managers and BDCs. BofA's basket similarly comprises European financial firms with private credit market exposure, enabling hedge fund managers to systematically hedge or express conviction against a sector experiencing withdrawal pressures and performance challenges.
Asset allocators are materially reshaping their hedge fund portfolios in 2026 based on BofA's survey of 280 institutional investors. The data reveals a clear preference for concentration: allocators maintained an average of 18 hedge funds per portfolio in 2025, down from 20 in 2024, while directing capital more aggressively to top-performing multi-strategy managers. This concentration strategy has accelerated dramatically, with 62% of surveyed investors negotiating expanded capacity rights in 2025, a near-fourfold increase from 17% in 2024. Vanessa Bogaardt, global head of capital introduction and prime financing at Bank of America, stated that "2025 marks a little bit of a turning point where sentiment and allocations have shifted positively, which signals an industry tailwind fueled by healthy performance over recent years."
Capital deployment patterns are intensifying around fewer relationships. Average allocations per fund increased from $42 million in 2024 to $50 million in 2025, reflecting both larger initial commitments and increased secondary allocations to existing positions. Approximately 51% of hedge fund investors plan to increase allocations in 2026, prioritizing hedge funds ahead of other alternative asset classes. The broader industry backdrop supports this reallocation, as hedge fund assets surpassed $5 trillion in Q3 2025, driven primarily by strong recent performance across multi-strategy and tactical strategies.
Concurrently, major investment banks have developed derivative products facilitating short exposure to private credit. Goldman Sachs, JPMorgan, and Bank of America have constructed baskets of listed equities with exposure to the $1.8 trillion private credit market. Goldman's offerings include indexes focused on European financial institutions and business development companies with private credit exposure, while JPMorgan's baskets encompass alternative managers and BDCs. BofA's basket similarly comprises European financial firms with private credit market exposure, enabling hedge fund managers to systematically hedge or express conviction against a sector experiencing withdrawal pressures and performance challenges.
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