H-Squared

New from Insights²: Your Weekly Market Briefing This week, we cover: ◾AI credit risk is now tradable, J.P. Morgan launches CDS baskets on hyperscalers ◾Hedge fund launches hit a 4-year high, while capital flows stay strong ◾Blackstone opens hedge fund strategies to retail investors ◾Allocator confidence in hedge funds is at an all-time high ◾Fundraising momentum returns, with top managers attracting significant capital If you want concise, actionable updates on hedge funds, credit markets, and alternatives, delivered in a clear, structured format, Insights² is for you.

Kite Lake Capital raising c. $700m, above target and in a single-day reopen, is a strong signal that hedge fund demand is picking back up. The ability to take capital and shut again quickly shows allocators are leaning in, not just maintaining exposure. It is not an isolated datapoint either. Taula Capital has also raised $1.75bn this year, pointing to a broader reopening of fundraising across the space. At the same time, more than half of investors in Bank of America’s 2026 hedge fund outlook are looking to increase allocations, with hedge funds the most in-demand asset class. Net, feels like a clear turn in sentiment. Capital is flowing again, allocators are increasing exposure, and high-quality managers are back in a position to be selective on inflows. https://lnkd.in/gbyeu9gQ

Investor confidence in hedge funds is very strong going into 2026, with over 90% of allocators in a recent survey naming them as their top strategy for returns and downside protection. Flow data supports this. Redemption levels remain low at 1.90% in March 2026, below last year and far from crisis levels, showing investors are holding or adding rather than pulling capital. In a backdrop of geopolitical tension, policy uncertainty, and high energy prices, hedge funds are valued for diversification, lower correlation, and more stable risk-adjusted returns. Allocators are focused on managing risk, increasing flexibility, and building resilience. Hedge funds are seen as effective across all three, particularly because they can take advantage of market dislocations. Overall, sentiment and flows point in the same direction. Hedge funds are becoming a core allocation, and staying on the sidelines is getting harder to justify. https://lnkd.in/gZJ86-YG

Blackstone is launching its first hedge fund aimed at affluent individual investors, as it expands beyond institutional clients into the retail wealth market. The new fund, called BXHF, will invest across credit, equities and special situations, with about 30% allocated to other hedge funds. It will offer relatively liquid investments and is expected to begin trading this year. It is open to accredited investors with at least $1 million in net worth or $200,000 in annual income, as well as wealthier qualified purchasers. This move reflects a broader industry trend, where alternative asset managers are targeting high-net-worth individuals and so-called mini-millionaires as a new source of capital. Blackstone has already been active in bringing private market investments to retail investors, and this marks its first hedge fund in that space. The fund will include some liquidity limits, allowing redemptions of up to 10% of assets per quarter, with a 2% fee for withdrawals within one year. Fees include a 1.25% management fee and a 12.5% performance fee above a 5% return, plus additional fees on investments in external hedge funds. It will sit within Blackstone’s Multi-Asset Investing unit, which manages over $96 billion and currently serves institutional investors. The new fund gives retail clients access to similar strategies and managers, though it will focus more on liquid assets than the firm’s institutional hedge fund offerings. Blackstone has significantly grown its private wealth business, now exceeding $300 billion, though some of its retail-focused funds have faced pressure in recent years, particularly in real estate and private credit. https://lnkd.in/d7RXpD6E

Hedge fund activity has picked up strongly, with new launches reaching their highest level in four years. Around 562 funds launched in 2025, signalling growing investor appetite as markets prepare for continued volatility driven by geopolitics, AI, crypto and macro uncertainty. At the same time, liquidations remained notably low at 287, highlighting a stable and resilient industry backdrop. Total industry capital has also climbed to a record $5.16 trillion heading into 2026. Momentum remained solid through late 2025, with 135 launches in the fourth quarter led by equity hedge and macro strategies, pointing to increasing demand for directional and globally aware approaches. Closures stayed contained, reinforcing overall industry health. Performance dispersion widened meaningfully, creating a strong environment for active managers. Top-performing funds delivered gains of over 47 percent on average, while the bottom tier declined, underlining the value of manager selection and alpha generation in more volatile markets. Fee trends were stable, with a slight reduction in management fees and a modest increase in incentive fees, particularly among newer funds. This suggests continued alignment between managers and investors while maintaining competitive structures. The launch of HFR’s new co-investment index further reflects innovation in the space, capturing strong returns and highlighting increasing investor interest in more direct, high-conviction opportunities alongside traditional allocations. Overall, the outlook for hedge funds remains constructive. Rising volatility, combined with demand for liquid, diversified and low-correlated strategies, is driving both capital inflows and new fund formation, positioning the industry for continued growth and relevance in 2026. https://lnkd.in/dRfWG5KC

J.P. Morgan has launched a new basket of credit default swaps tied to five AI hyperscalers: Alphabet, Amazon, Meta, Microsoft and Oracle. The product allows investors to trade in $25 million increments, split evenly across the firms, giving a more liquid way to hedge or take directional views on their credit risk. The move reflects rising demand from hedge funds and other investors for tools to manage exposure to the heavy borrowing these companies are undertaking to fund AI infrastructure. Investors are increasingly focused on AI risk, particularly the potential strain that large-scale debt issuance could place on balance sheets. Trading in single-name CDS has surged over the past year, becoming some of the most active US derivatives outside financials. Oracle stands out as the most liquid investment-grade CDS, with average weekly trading volumes exceeding $830 million. Alongside this, Citadel Securities has been making markets in similar baskets of corporate bonds linked to hyperscalers, highlighting broader market interest in structured ways to hedge or express views on the sector. The development fits into a wider trend of Wall Street creating products that allow investors to short or hedge concentrated exposures, including baskets linked to private credit. https://lnkd.in/gCNtMbRZ

Research from PivotalPath suggests that extreme oil price environments tend to favour certain hedge fund strategies, particularly managed futures and global macro commodities. The analysis comes as geopolitical tensions in the Middle East have pushed crude prices sharply higher, briefly reaching $120 per barrel before pulling back to around $100, raising concerns about energy-driven market volatility. Using 26 years of hedge fund data, PivotalPath found that when oil trades between $100 and $140 per barrel, the S&P 500 historically declines about 1.6% annually, while the broader hedge fund universe returns a modest 2.5%. In contrast, managed futures gain about 9.1% and global macro commodities strategies return 8.8%, highlighting their potential as diversifiers during energy shocks. Hedge funds have also historically performed well when oil prices are very low. When crude trades below $50, the PivotalPath Composite Index returns 10.2% on average, with global macro discretionary and commodities strategies delivering more than 13%. The findings underscore the growing importance of oil price regimes for portfolio construction, as energy shocks can weaken equities while creating opportunities for adaptive and uncorrelated hedge fund strategies. Higher oil prices are also linked to rising inflation, another environment where managed futures and macro commodities strategies have historically generated strong returns. Despite this evidence, allocator positioning does not fully reflect the trend. While global macro is among the most favoured strategies heading into 2026, managed futures and CTAs remain relatively underweighted, suggesting investors may be overlooking strategies that historically perform well during periods of extreme energy volatility. https://lnkd.in/gmanBiB9

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Saba Capital Management, L.P., the hedge fund run by Boaz Weinstein, has launched a tender offer to purchase up to 6.9% of the remaining shares in Blue Owl Capital Corporation II at $3.80 per share, a 34.9% discount to the current share price. The offer follows the decision by the $1.7bn business development company to permanently halt redemptions, leaving investors with limited liquidity options. Saba is working with Cox Capital Management, which has built an online platform that allows shareholders to tender their shares. If more shares are offered than the 8 million Saba and Cox intend to purchase, they will acquire them on a proportional basis. The firms are also expected to pursue similar actions involving Blue Owl Technology Income Corp and Blue Owl Credit Income Corp. The move comes as Saba continues its activist campaigns in the UK investment trust market. After unsuccessful attempts to take control of several trusts last year, Saba recently partnered with HanETF to launch the Saba Capital Investment Trusts UCITS ETF, which will allow it to build stakes and gain voting rights in listed investment trusts. https://lnkd.in/gWySKH-4

STG Group, a systematic and quantitative multi-asset trading firm founded in 2022 by former Squarepoint principals, has launched STG Securities, a new broker-dealer and electronic market-making division. The unit will trade using its own capital and operate independently from Squarepoint’s hedge fund activities. It builds on STG’s 2024 acquisition of Automated Volatility Trading (AVT), formerly Barclays’ U.S. options trading group and later part of GTS, bringing its technology, personnel and systematic options expertise into the new platform. Led by @Kirill Gelman, the new division aims to provide liquidity across exchanges using quantitative models and automated trading systems. STG Securities will compete with established electronic market makers such as Citadel Securities, Jane Street, and Two Sigma. The launch also reflects a broader industry shift, with technology-driven trading firms expanding into both market-making and investment strategies as banks have pulled back from traditional market-making due to tighter regulation and balance sheet constraints. https://lnkd.in/dui9azui