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Matthias Knab, Opalesque for New Managers:

Hedge funds are experiencing a resurgence in allocator confidence, with institutional investors planning to increase exposure and net inflows accelerating into 2026. According to BNP Paribas' annual survey of 246 allocators representing $1.1 trillion in hedge fund assets - over one fifth of industry AUM - the outlook for hedge funds remains decidedly positive as the asset class continues delivering diversified returns amid rising market dispersion.

Hedge funds delivered compelling returns in 2025, achieving 10.53% net performance and generating 641 basis points of excess return over cash. This substantially exceeded the typical allocator target of cash plus 400-600 basis points. Over the trailing five-year period, hedge funds returned 7.96% annualized, representing 466 basis points annually over cash.

Alpha generation has continued year over year, with hedge funds producing 2.13% of outperformance versus the MSCI World in 2025 and 3.02% on a five-year annualized basis. This consistent value-add demonstrates the asset class's ability to generate returns beyond broad market exposure.

While correlation to equity markets has gradually increased - rising to 0.92 over the past 12 months versus 0.80 ove......................

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