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In 2025, Swiss investors faced a familiar challenge: They had to build resilient portfolios in an environment of zero interest rates, foreign uncertainty, and a strong currency. The obvious decision for many investors was to keep money at home. However, international allocations to alternative investments—hedge funds, private equity, private credit, and infrastructure—also helped in 2025 to improve diversification, stabilize returns, and cushion market fluctuations. This is likely to remain the case in the new year: Our outlook for alternative investments in 2026 remains positive.

Let’s start with the facts: In 2025, hedge funds achieved positive results across all major strategies. Preferred strategies such as equity long/short funds, merger arbitrage, discretionary macro, and multi-strategy funds helped limit losses during periods of heightened volatility. While traditional 60/40 portfolios benefited from the equity rally, hedge funds added further value through active risk management and positive returns.

Private equity (PE) delivered muted but positive returns. Many managers’ activity gradually recovered; deal flow—a measure of investment opportunities for PE funds—increased by 14.5% through September, according to PitchBook data, and successful exits also picked up, not least because central banks loosened monetary policy. Within private credit, direct lending continued to offer high returns in US dollars, averaging close to 4.5% in the first half of 2025, as per the Cliffwater Direct Lending Index. Although some corporate bankruptcies made headlines, overall default rates remained low and fundraising was strong.

In our view, alternative investments should also play an important role in Swiss portfolios next year. Significant performance differences and ongoing uncertainty are likely to continue favoring active management, and hedge funds—especially equity long/short, macro, and multi-strategy approaches—seem well positioned to benefit from changing trends. We continue to find merger arbitrage attractive, as M&A activity is expected to increase. And we believe hedge funds can again contribute to portfolio diversification and deliver attractive positive returns in 2026.

In private equity, we expect more exit activity and distributions, as the Federal Reserve is likely to continue lowering interest rates. Private credit should offer solid returns, in our view, but tighter spreads and probably lower interest rates mean that manager selection and credit quality will become even more important. Infrastructure—especially digital, renewable energy, and the energy transition—will likely remain in focus for inflation protection and stable cash flows, while real estate in sectors such as health care, logistics, and residential should continue to see solid demand.

The main risks include illiquidity—especially for investors with short- to medium-term capital needs. Valuations in some segments are also unattractive. Therefore, in our view, alternative investments should be integrated into the overall portfolio to balance growth, income, and liquidity. We consider regular adjustment to changing market conditions just as important as periodic rebalancing. And good diversification remains crucial here as well.

In summary, we maintain that we also see potential in alternative investments in 2026 to help meet the challenges of building resilient portfolios in a low interest rate environment—they offer diversification and returns. With thoughtful allocation and careful risk management, we believe alternative investments can continue to support the long-term goals of Swiss investors.