Hedge funds in family office portfolios: are they back in favour?

Hedge funds occupy a small slice of family office portfolios, and the 2026 survey data show the weight rising for the first time in several years. UBS's Global Family Office Report 2026 records hedge funds at 6% of the average portfolio at the end of 2025, up from 4% in 2024, with 6% planned again for 2026. Goldman Sachs's 2025 survey found 6%, unchanged since 2023. Citi's 2025 report found 5%, up one point on the prior year, with net sentiment of plus 14%. J.P. Morgan's 2026 report found 4.7%. The allocation is back in favour in the sense that the weight has risen and no survey shows a planned cut, though from a low base and for reasons that are about portfolio construction rather than return.

Where the allocation stands

Sources: as linked. Regional variation is wide. UBS's 2025 report had hedge funds at 9% in North Asia and 5% in Switzerland, while Citi's 2025 tables show 4% in Asia Pacific, and Citi's net sentiment was plus 34% in Asia Pacific, plus 18% in EMEA and minus 16% in Latin America.

The reasons offices give

The stated purpose is diversification rather than return. UBS's 2024 report found 33% of offices using hedge funds for diversification, and the 2025 report found 31% relying on them, the second most cited approach after manager selection or active management at 40%. The 2025 report also recorded that 38% of offices found it difficult to identify a risk offsetting strategy and 29% considered safety assets unpredictable because of unstable correlations. That context matters: when bonds and equities fall together, a hedge fund with low beta is one of the few liquid diversifiers available, and UBS's 2025 respondents named high quality short duration fixed income (26%) and precious metals (19%) as the alternatives.

Citi's 2025 survey asked which asset classes respondents were most bullish on over the next 12 months. Hedge funds tied with global developed equities at the top at 29%, ahead of direct private equity at 28% and private credit at 26%. The same survey found that Asia Pacific offices were the most positive, which matches Citi's 2026 finding that 49% of Asia Pacific offices had implemented hedging strategies and 62% used active management.

What changed between 2023 and 2026

Three things. First, the alternatives bucket has been rebalanced. UBS's 2026 data show private equity falling from 21% of the portfolio in 2024 to 17% in 2025 while hedge funds rose from 4% to 6% and total alternatives slipped from 44% to 42%, and respondents plan a further cut in real estate from 11% to 8% in 2026. Hedge funds are the only alternative that can be funded and redeemed in months rather than years, which makes them the natural home for money leaving private equity that the office does not want in listed equities. Second, the liquidity argument has strengthened. With private equity distributions slow, a liquid alternatives sleeve provides capital for calls and opportunities without selling equities, a point discussed in family office liquidity management. Third, geopolitical risk, named by 64% of UBS's 2026 respondents as the top 12 month risk, favours strategies other than long only exposure.

The counter view

J.P. Morgan's data complicate the picture. Its 2026 report found that offices most concerned about inflation held 0% in hedge funds against an average of 4.7%, preferring real estate at 16.3% and a 60% private markets and alternatives weight. Goldman's allocation has been flat at 6% for two years, and its release mentions greater interest in adding hedge funds only in EMEA and APAC. Campden Wealth's Asia-Pacific respondents earned 8% from hedge funds in 2024, below the 18% from developed market equities and 11% from private credit, so the recent return record does not by itself justify a larger weight.

Hedge funds are a 5% to 6% holding that most offices keep for diversification and liquidity, and the 2026 data show the UBS average moving to the upper end of that range. Whether it stays there depends on whether the money that left private equity in 2025 remains in liquid alternatives or moves on to listed equities. How the whole alternatives bucket compares across surveys is covered in how much family offices allocate to alternatives, and the full UBS picture in family office asset allocation in 2026.