Institutional investors from Asia and other markets are predicting significant growth in the hedge fund sector over the next three years, a new global study reveals.

Nearly all ( 93% ) of the investors surveyed expect fund raising in the sector to rise by at least 10%, with 14% of respondents projecting growth of over 20%, according to the study commissioned by financial technology firm Beacon Platform.

Key market players such as pension funds, family offices, and insurers are expected to be at the forefront of this expansion, particularly in markets like Hong Kong and Singapore.

The report highlights a global increase in hedge fund allocations, driven by a desire for stronger risk-adjusted returns. Across the surveyed regions, 91% of investors anticipate the industry will add more than US$190 billion in assets this year alone, with a quarter expecting that figure to be between US$250 billion and US$500 billion.

Hedge Fund Research data earlier this year showed that total assets under management had already reached a record US$4.6 trillion at the end of the first quarter.

However, concerns persist with the majority ( 88% ) of respondents, including a significant number from Asia, emphasizing the need for better transparency and higher-quality information from hedge funds. About 93% of those surveyed agreed that risk management practices must improve, with 85% admitting to avoiding certain funds due to insufficient risk controls.

Asian investors, particularly pension funds and sovereign wealth funds, are expected to increase allocations, with 81% of pension funds likely to raise their hedge fund investments by 10% or more.

To tap into this expected growth, hedge funds must address transparency and risk management concerns if they wish to attract further capital from institutional and retail investors, the study says.

The study covered pension funds, family offices, and insurance asset managers in the United States, the United Kingdom, Germany, Switzerland, France, Italy, Hong Kong, and Singapore