Bonds' "safe-haven" role fails as Asian investors flock to hedge funds.

Title context: Bonds' "safe-haven" role fails as Asian investors flock to hedge funds. Text: 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. Private bankers and asset allocation institutions say Asian investors are increasingly seeking asset diversification, no longer confining themselves to traditional stock and bond allocations. This trend is putting 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 Money Seeks a New Safe Haven: Hedge Funds in Demand According to Hedge Fund Research (HFR) data, in the second quarter of 2026, global hedge fund assets increased by $409 billion to $5.6 trillion, setting a record for the largest quarterly increase. Swiss private bank UBP said that since the end of 2024, among its Asian discretionary portfolio management clients, the share of mandates allocated solely to hedge funds 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 slump over the same period. Safe assets that were supposed to preserve value have instead become a source of losses in portfolios. The HFR-tracked global hedge fund index rose 12.4% in 2025, posting positive returns for a third consecutive year and the 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 allocations to alternative asset classes," said Rani Piputri, senior director of public investments at Danantara Investment Management, the Indonesian sovereign wealth fund. The institution is targeting hedge fund exposure of 5%. "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 about 10% exposure, especially multi-strategy funds with low correlation to the broad market. Adeline Tan, head of investments for Asia at Marsh, said wealth management firms, family offices and large investors, including Japanese defined-benefit pension funds, have shown interest because of concerns over bonds' poor performance 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 is creating 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, citing growing market concerns about AI concentration risk. Of course, performance and fund flows within the hedge fund industry are clearly diverging. Yang said increasing hedge fund allocations is not about replacing traditional portfolios, but supplementing them, enhancing the portfolio's 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 is a $233 billion systematic fund that collects data on tens of thousands of companies and runs strategies designed to modestly but consistently outperform equity indices. Its assets in Asia have quadrupled over four years. "We think we've never seen such heightened interest in 20 years," said Acadian CEO Kelly Young.