The number of Asia-Pacific-focused hedge funds is expected to decline further in 2026 as the industry continues to consolidate following two consecutive years of net fund closures through 2025, according to a new report from Preqin.

The report – APAC Private Markets in 2026 – suggests that tougher fundraising conditions and a continued investor preference for established track records and scale are likely to weigh on new fund formation, particularly among emerging managers. This is expected to accelerate closures and drive further consolidation into larger, more established platforms, reinforcing a more concentrated industry structure.

Strategies focused on China are likely to remain under pressure due to regulatory constraints and capital controls, which continue to limit both fund launches and institutional allocation flows. In contrast, broader Asia-regional strategies have gained relative traction, accounting for more than 20% of fund launches in 2025 as managers seek to diversify exposure across uneven regional market conditions.

Within the region, South Korea is highlighted as a potential growth hub for hedge fund activity, supported by strong equity market performance and thematic interest in artificial intelligence-linked sectors.

Despite ongoing structural challenges, the outlook notes that APAC remains underrepresented in global hedge fund assets under management. Over the medium term, allocation growth is expected to continue, driven by investor demand for diversification and risk-adjusted returns, although at a gradual and selective pace.