The BlackRock Investment Institute has recommended its largest-ever boost to hedge fund allocations, advising institutional investors to add up to 5 percentage points more to the asset class compared with pre-2020 levels, according to a report by the Financial Times.

Strategists at the world’s largest asset manager said hedge funds should be funded by trimming positions in developed market equities and government bonds, without reducing private market allocations.

BlackRock cited heightened macroeconomic uncertainty, inflation volatility and geopolitical risks as reasons to increase exposure, pointing to the stronger post-pandemic performance of macro funds. London-based Rokos Capital Management is up 13.7% year-to-date, while Brevan Howard has seen mixed results across strategies.

According to Preqin data, institutional allocations currently range from 4% for European pension funds to 17% for US wealth managers.