Hedge Funds Extended

UBS highlights hedge funds as essential for alpha and diversification in a 2026 market defined by high concentration and macro uncertainty. The report favors market-neutral, merger arbitrage, and discretionary macro strategies while warning of crowded AI trades.

Key Takeaways

• 1.Hedge funds are prioritized as a building block to manage high equity concentration and provide diversification as traditional stock-bond correlations become less stable.
• 2.UBS favors market-neutral strategies, merger arbitrage, fixed income relative value (FIRV), and discretionary macro due to high market dispersion and rate volatility.
• 3.The second half of 2026 is expected to be defined by sector and regional dispersion rather than directional trends, favoring managers who can exploit market dislocations.

Table of Contents

• Executive summary
• Quarterly performance review
• Equity hedge
• Event-driven
• Relative value
• Macro trading
• Special topics
• Appendix

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