January 2026

December’s broad mix of shifting political power, policy recalibration and late-cycle market behaviour continued to favour hedge funds. While geopolitics dominated (see full market review), performance across strategies was impressive, with the HFRI Fund Weighted Composite Index up 1.6% in December, taking full-year gains to 12.6%.

When Simon Brewer sat down with Cathie Wood for a broad conversation on technological disruption, the moment felt emblematic of the era she so vividly describes, one in which the pace of change is accelerating beyond anything seen since the breakthroughs of the late 19th and early 20th centuries.

The hunt for new sources of capital (think HNW, retail channels, and co-investments) dominated the alternative market zeitgeist in 2025 and no doubt will continue as we move into the New Year. Fund raising is not getting any easier.

Alternative investments have officially hit capacity. What was once an exclusive club for institutional investors has become a global block party with private credit, private equity, tokenization, and retailization all crowding the floor. Preliminary CAIA data estimates private markets have surged to nearly $26.2 trillion in AUM in 2025.

As we enter a new year that has already begun with heightened geopolitical and macro uncertainty, hedge funds remain an important tool for investors seeking diversification and active risk management. This dynamic was evident in 2025, when hedge funds delivered strong performance, supported by the opportunities that market volatility can create for active managers.

While deal making and historical returns remain the top performance metrics, leading managers are increasingly prioritizing operational excellence, and for good reason. Operational missteps can trigger a range of consequences including regulatory fines and damaged investor relationships.

As we begin a new year, it would not be a far stretch to assume many who looked to the crypto markets in 2025 were speculating their digital assets of choice would ride the presumption of volatility in an ever-upward price movement.

As we look back on 2025, one of the most defining developments in the UAE has been the extraordinary expansion of Dubai International Financial Centre (DIFC) as the preferred destination for the world’s hedge fund community. Towards the end of 2025, DIFC surpassed a major milestone, more than 100 hedge fund managers are now registered in the Centre.

The past decade has laid the groundwork for a structural transformation in private markets. What was once the exclusive domain of institutional allocators and ultra-high-net-worth investors is steadily opening to a broader investor base.

Moderating the iConnections Global Alts Asia session on global allocator trends at the end of last year offered a timely window into how investment teams are navigating one of the most unpredictable market environments in years.

2026 is shaping up to be a strong year for hedge funds as investors continue to reassess allocations in a more volatile and uncertain market. Persistent geopolitical risk, uneven economic growth and higher for longer interest rates have reinforced the role of hedge funds as risk-mitigating, uncorrelated return generators, rather than equity substitutes.

TPG secured approximately $6.2 billion for its latest private credit vehicle, TPG Credit Solutions Fund III, underscoring continued institutional appetite for large-scale lending strategies. Bloomberg reports the fund exceeded its original $4.5 billion target as investors leaned into private credit opportunities.

Dragoneer Investment Group raised $4.3 billion for its seventh growth-stage fund. The San Francisco manager specialises in long-duration growth investments in leading software, fintech, internet platforms and consumer-technology companies with 'durable revenue models'.

Deerpath Capital closed its seventh flagship private credit fund, Deerpath Fund VII, surpassing the $2 billion equity target with $2.2 billion in investor commitments and anticipated total investable capital of ~$3.5 billion when leveraged CLO capacity is included.

Eiffel Investment Group raised more than €1 billion for Eiffel Energy Transition. Headquartered in Paris, Eiffel finances energy transition across Europe in renewable energy, energy efficiency, sustainable infrastructure and low-carbon technologies.

Better known as one of the big beasts in private credit, Ares Management is now openly assessing how to expand its private equity footprint, potentially through a sizeable acquisition. Such a move, reported in the Financial Times, reflects a recognition that scale in buyouts increasingly matters as competition intensifies across alternatives.

MML Capital Partners announced the final close of MML Keystone I and related co-investment vehicles at €935 million. Keystone targets a hybrid private equity and infrastructure strategy focused on high-growth asset-backed businesses providing essential services tied to long-term secular themes.

Temasek backed SeaTown Holdings announced the second close for SeaTown Private Credit Fund III, taking commitments to approximately $900 million. The fund focuses on private credit opportunities globally, targeting senior secured lending, structured credit, and bespoke financing solutions for middle-market and sponsor-backed companies.

Gemcorp Capital and Angola’s sovereign wealth fund FSDEA announced the Pan-African Infrastructure Fund, targeting $500 million to invest in energy, logistics, digital infrastructure and climate-linked assets across sub-Saharan Africa.

Oak Hill Advisors announced its Senior Private Lending platform (OLEND) now has $17.7 billion in total available capital, including $8.0 billion in equity commitments, following extensive fundraising across multiple vehicles. The platform focuses on senior secured private lending to large, sponsor-backed companies.

Pathlight Capital announced commitments across Fund IV and its evergreen vehicle had hit approximately $1.9 billion, reflecting strong investor demand for asset-based and special-situations lending strategies.

J.P. Morgan Asset Management closed PEG Global Private Equity XII at $1.4 billion. The fund invests globally across buyout and venture capital managers through primaries, secondaries and co-investments.

Last year’s private equity fundraising remained subdued overall, but it was the largest managers who continued to command an outsized share of limited partner commitments, according to PitchBook data. By year-end, industry tracking showed that the top 10 private equity funds had captured approximately 46% of all capital raised.

Millennium Management continued to broaden its externally backed managers platform with investments in Fulcrum Asset Management and start-up Armar Capital. According to Bloomberg, Fulcrum received $2.3 billion, structured as a separately managed account, while Armar was allocated $850 million.

Discretionary macro finally showed what it is all about, after a multi-year lull, as managers turned broad policy shifts, interest rate moves, a weakening dollar, and volatile commodity markets into substantial gains.

Artificial intelligence was one of the best investments across private capital in 2025, with hedge funds and private equity firms capturing gains across AI hardware, software and infrastructure. AI-exposed equities led the charge, as Nvidia rose ~40%, while a broader basket of semiconductor, power-infrastructure and data-centre names delivered high-teens to mid-20s returns.

The agitators were out in force last year as shareholder activism accelerated sharply, with 255 global campaigns surpassing the previous record and marking the third consecutive year of rising activity, according to Barclays’ annual shareholder activism review.

The Dubai International Financial Centre (DIFC) cemented its position as a top-five global hub for hedge fund managers, as it surpassed the 100 registered hedge funds milestone. This underscores the pace of expansion, with the number of hedge fund managers more than doubling from 50 at the start of 2024.

The FCA has published Consultation Paper CP25/36 which proposes certain changes to the client categorisation processes. The consultation sets out the FCA’s proposal to remove certain restrictions and allow firms to make well founded assessments of whether a client meets the threshold of a professional client.

On 12 December 2025, the FCA published its final guidance, PS25/23, on tackling non-financial misconduct (“NFM”) in financial services.

HM Treasury’s 2025 policy update proposes a new “learner plates” route to market for unauthorised, early-stage financial services firms, particularly those with innovative business models that require time to develop people, systems, and controls.

The SEC’s Division of Examinations on 16 December 2025 released a Risk Alert highlighting observations regarding continued deficiencies in investment advisers’ compliance with the Advisers Act Marketing Rule, particularly around testimonials, endorsements, and third-party ratings.

On December 19, 2025, the US Commodity Futures Trading Commission’s (“CFTC”) Market Participants Division (“MPD”) issued a significant No-Action Letter in response to a request from the Managed Funds Association (“MFA”).