At this year’s ALTSCHI conference, a consistent theme emerged across discussions of geopolitics, private markets, portfolio construction, technology and liquidity: the alternative investment industry is not simply moving through another market cycle. It appears to be undergoing a structural reset.
Public and private markets continue to converge. Technology is advancing faster than many operating and regulatory frameworks, while investors are reassessing the tradeoffs among liquidity, diversification, transparency and return potential. Asset managers, in turn, are redesigning products for a broader and more demanding investor base.
One of the conference sessions our firm moderated explored a fundamental question: Why do hedge funds matter again, or did they ever stop? Below highlights our key takeaways and insights on the topic.
Global hedge fund industry capital reached a record $5.22 trillion during the first quarter of 2026, according to a recent HFR market article, continuing a sustained period of asset growth and renewed investor inflows. The numbers suggest hedge funds did not lose their relevance following the global financial crisis. Instead, investors became more selective about the strategies they would support, the managers with whom they would invest and the terms under which they would commit capital.
Renewed interest reflects geopolitical uncertainty, changing interest rate dynamics, demand for differentiated returns and a renewed appreciation for liquidity after an extended period of private-market illiquidity.
The definition of a hedge fund has evolved as well. Twenty years ago, it was typically rooted in strategy: long/short equity, global macro, event-driven or relative value. Today, the conversation is just as likely to focus on the vehicle, redemption terms, investor experience or liquidity profile. The strategy remains important, but so does the structure through which it is delivered.
Innovation in asset management has traditionally focused on investment strategy. Increasingly, it is occurring in the wrapper as well.
Evergreen, open-end and hybrid vehicles can provide greater flexibility than traditional closed-end private funds while expanding access to a wider range of assets and strategies. These structures appear to reflect a lasting shift in how investors want to access alternatives.
But the wrapper cannot be considered independently from the portfolio it contains. A well-designed vehicle begins with a clear understanding of the underlying assets, how they are valued and how readily they can be converted to cash.
Liquidity is often described by how frequently an investor can redeem. The increasingly important question is whether the liquidity offered aligns with the liquidity of the underlying portfolio. A vehicle offering frequent redemptions while holding difficult-to-value or less-liquid investments may create stress for the fund and its remaining investors.
Managers must consider how quickly they can exit positions in normal and stressed markets, the reliability of valuations, investor concentration, the possibility of clustered redemption requests and the liquidity tools available. More liquidity is not automatically better. Appropriate liquidity will win out. Greater flexibility also raises the operational bar. Managers need infrastructure capable of supporting recurring subscriptions and redemptions, more frequent valuations, liquidity forecasting and consistent investor communication. Clear policies, effective governance, experienced service providers, appropriate technology and transparent disclosure are all critical.
Product design cannot move too far ahead of the operating model. The structure should make a promise the portfolio and operating platform can realistically keep.
Flexible structures require investors to place significant trust in a manager’s valuation policies, governance, operations and communication, particularly when assets are not continuously priced. Investors need to understand how assets are valued, who exercises oversight, how conflicts are managed and what may happen during periods of market stress. Transparency does not require revealing every position or proprietary process. It does require enough information for investors to understand the risks they are accepting, the role the investment serves and whether the vehicle is behaving as expected.
The simplest guidance may also be the most important: Know what you own. Technology may improve how investors access and transact in alternative investments, but it does not change the economic substance of the assets. Tokenizing an interest in an illiquid investment may improve transferability or administration, but it does not create a market where one does not otherwise exist. Tokenization may become valuable infrastructure; it is not, by itself, a cure for illiquidity.
Product innovation cannot replace investment performance. Investors are likely to demand greater transparency, stronger diversification and clearer evidence that a strategy is producing differentiated returns. They are not looking to pay premium fees for market beta. Alpha generation and the role a strategy plays within an investor’s broader portfolio must justify the cost.
New allocations are also increasingly concentrated among the industry’s largest managers. Firms managing more than $5 billion received nearly 88% of hedge fund net inflows during 2025 according to HFR, a trend that continued into the first quarter of 2026. This helps explain the continued growth of large multimanager platforms, but it should not be interpreted as an absence of opportunity elsewhere. The trend may reflect institutional preferences for scale, infrastructure and simplified oversight as much as a judgment about where investment talent resides.
Emerging and smaller managers can offer differentiated strategies, greater alignment and access to specialized or capacity-constrained opportunities that may be difficult to pursue at scale. A compelling strategy, clearly articulated edge and institutional quality infrastructure can demonstrate that smaller does not mean less sophisticated, and that AUM is not the only measure to consider.
Allocators are strengthening their geopolitical awareness (it is affecting everything), reconsidering traditional risk models and evaluating exposures based on their contribution to total portfolio objectives rather than solely by asset-class labels.
Vehicle innovation has expanded access to private markets, but investors are also placing renewed emphasis on liquidity and uncorrelated returns. Emerging managers remain important sources of specialized ideas, even as investors consider how less-established teams and strategies may perform across a full range of market cycles.
The common denominator is the investor. Evergreen vehicles, hybrid funds, separately managed accounts, tokenization and other innovations are responses to changing expectations around access, liquidity, governance, transparency and investor experience. But innovation should remain grounded in purpose.
The next generation of hedge fund structures will likely offer investors greater flexibility. Delivering that flexibility responsibly will require thoughtful product design, operational strength and clear alignment between the vehicle and its investments. Structures will continue to evolve. The responsibility to understand what sits beneath them and whether they align with investor expectations will not.
Contact Camille Clemons or a member of your service team to discuss this topic further.
In this blog Cohen & Co is not rendering legal, accounting, investment, tax or other professional advice. Rather, the information contained in this blog is for general informational purposes only. Any decisions or actions based on the general information contained in this blog should be made or taken only after a detailed review of the specific facts, circumstances and current law with your professional advisers.