Finance
BlackRock research arm bigs up hedge funds to investors
Published by Global Banking & Finance Review®
Posted on August 21, 2025
2 min readLast updated: January 22, 2026
Quick Summary
BlackRock advises investors to increase hedge fund exposure by 5%, reallocating from bonds and stocks to enhance portfolio performance amid regulatory changes.
BlackRock Advocates Increased Hedge Fund Investments for Investors
BlackRock's Recommendations on Hedge Funds
(Corrects paragraph 2 to say BlackRock recommends dedicating up to an additional 5% of portfolios to hedge fund investments from current levels [not recommends dedicating up to 5% of their portfolios to hedge funds])
Investment Strategy Adjustments
LONDON (Reuters) -The BlackRock Investment Institute believes investors should bulk up their exposure to hedge funds, the company said on Thursday.
Market Performance Overview
The research arm of the asset manager suggests investors dedicate up to 5% more of their portfolios from their current levels to hedge fund investments, the highest the institute has ever recommended.
Regulatory Changes Impacting Investments
Investors might take money from holdings in developed market government bonds and instead use this money for less risky hedge funds, it said in a note.
Allocators comfortable with a bit more risk could take money from the stocks portions of their portfolios and instead redirect that money at higher risk hedge funds.
The asset manager side of BlackRock, which also acts as a middleman for investors wanting to spend money on hedge funds, oversees $76 billion in hedge fund assets including direct hedge fund investments and hedge fund-related businesses, the company website says.
U.S. President Trump in August signed a White House order directing regulators to expand access to alternative investments to 401k retirement portfolios, like hedge funds, adding a new layer of risk open to ordinary investors.
BlackRock, which lobbied the Trump administration to expand asset options, plans to launch its own retirement fund that includes private equity and private credit assets next year.
The broader hedge fund universe returned 1.1% in July and returns are up 5.2% so far in the year to July 31, figures from PivotalPath showed. Hedge funds are up roughly 8% over the past five years on an annualised basis.
The S&P 500 and Nasdaq stock indexes have both risen roughly 9-10% this year.
JPMorgan's global government bond fund was up around 2% as of July 31, it says on the bank's website.
(Reporting by Nell Mackenzie; editing by Dhara Ranasinghe and Hugh Lawson)
Key Takeaways
- •BlackRock recommends increasing hedge fund investments by 5%.
- •Investors may shift funds from bonds to hedge funds.
- •BlackRock oversees $76 billion in hedge fund assets.
- •U.S. regulatory changes allow more 401k access to hedge funds.
- •Hedge funds have shown steady returns over recent years.
Frequently Asked Questions about BlackRock research arm bigs up hedge funds to investors
1What is a hedge fund?
A hedge fund is an investment fund that employs various strategies to earn active returns for its investors, often using leverage and derivatives.
2What is an investment portfolio?
An investment portfolio is a collection of financial assets like stocks, bonds, and cash equivalents held by an investor.
3What is asset management?
Asset management is the process of managing investments on behalf of clients, including strategies for maximizing returns and minimizing risks.
4What are regulatory changes?
Regulatory changes refer to modifications in laws and regulations that govern financial markets and institutions, impacting how they operate.
