Hedge funds saw mixed results in February as market volatility surged amid trade tariff uncertainties. Fixed-income strategies performed well, benefiting from falling interest rates, while macro and equity hedge funds struggled due to sharp declines in technology stocks. 

The HFRI Fund Weighted Composite Index fell 0.47%, with relative value arbitrage and event-driven strategies posting gains that were outweighed by broader declines. Cryptocurrency funds took a significant hit, with the HFR Cryptocurrency Index dropping 16.8% as volatility spiked. 

Meanwhile, event-driven funds gained modestly, and fixed-income strategies extended their winning streak, marking another month of positive returns. 

Finsum: As hedge funds navigate volatile conditions, their ability to adapt remains key to delivering returns in uncertain markets.

Asia’s hedge fund market is evolving, with diversification beyond long/short equity into multi-strategy and quantitative approaches, particularly in Japan. The adoption of separately managed accounts (SMAs) is rising, offering investors greater customization, risk control, and transparency. 

Allocators are increasingly partnering with emerging managers early, securing better terms and gaining specialized market insights. Transparency and authenticity are becoming crucial, as investors seek managers who openly share their strategies, risks, and past performance. 

Japan remains a key focus, while sectors like artificial intelligence and semiconductors present new investment opportunities. 

Finsum: Despite these trends, raising capital remains challenging for emerging managers, who must establish strong infrastructure and a compelling value proposition to attract investors.

Sixteen years ago, alternative investments barely featured in most portfolios, aside from a modest allocation to commodities. Options for retail investors were limited, with most alternatives either prohibitively expensive or inaccessible. 

Today, portfolios tell a completely different story, with many being dedicated to alternatives like private equity, private credit, and reinsurance, reflecting how the landscape has evolved. 

Advances such as interval funds and lower fee structures have opened doors for individual investors to tap into the benefits of these assets, including the sought-after illiquidity premium. Unlike the past, where high fees often negated returns, competitive pricing and improved liquidity have made alternatives a more viable choice. 

Finsum: These innovations now allow for greater diversification and the potential to cushion traditional portfolios against market volatility.