Asset allocators are preparing to channel more capital into multi-strategy hedge funds in 2026, accelerating an industry-wide shift toward the largest and best-performing platforms, according to a report by Reuters citing the findings of a Bank of America survey.
The poll of 280 hedge fund allocators found investors are increasingly consolidating their portfolios, backing fewer managers while committing larger amounts of capital to high-conviction multi-manager firms following a strong year for performance.
On average, allocator portfolios held around 18 hedge funds in 2025, down from 20 the previous year, while average allocations per fund rose to $50m from $42m. More than half of respondents said they plan to increase hedge fund allocations in 2026, making the sector a higher priority than other alternative investments.
Bank of America said 62% of investors negotiated increased capacity rights with hedge funds last year, up sharply from 17% in 2024, reflecting heightened competition for access to top-performing managers. Allocators are increasingly focused on securing long-term relationships with established platforms as demand for capacity tightens.
“2025 marked a turning point in sentiment, with allocations shifting positively on the back of strong performance,” said Vanessa Bogaardt, global head of capital introduction and prime financing at Bank of America. She added that investors are not only planning to allocate to hedge funds in 2026, but to allocate more capital overall.
The trend has also benefited Wall Street’s prime brokerage businesses, which reported strong revenue growth in recent quarters as large multi-strategy funds used leverage and financing to navigate volatile markets.
According to Bank of America, hedge fund industry assets reached a record $5tn by the end of the third quarter of 2025, supported by strong investment returns and net inflows of around $71bn. Allocators reported average hedge fund returns of 11.7% for the year, with equity long-short strategies leading performance at 18%, followed by discretionary macro funds, which returned 15.4%.
