Desmond Lawlor – Senior Vice President – Capital Introduction (London)
Liquidity and performance continue to drive momentum toward hedge funds, something we have observed in our conversations with allocators across Europe, the Middle East, and Asia.
Globally, hedge fund investments reached their highest level through the end of Q3 2025, with allocators investing $34bn in the quarter, the largest net inflows since 2007, according to HFR’s most recent report. That brings the YTD net inflows to $71bn.
Here in Europe, the usual suspects remain at the top of the shopping list: long/short equity and low-net or market neutral strategies where managers with pedigree and a strong track record still carry more appeal than their longer-biased counterparts. This is in part due to allocators focusing on expected performance over a three-year period rather than higher-beta strategies where volatility and drawdowns can be much bigger over the same time frame.
In terms of geographical focus, the U.S. has, for the first time, experienced some indifference, whether this is due to concerns around over-exposure or due to investors seeing opportunities in Europe as a whole for the first time in almost 10 years. This has been a common theme in our recent conversations with investors here in Europe, who have historically been more bullish about the U.S., but have taken note as European equities have outperformed the year.
China and Japan remain the staples of the Asian investor landscape, with Japanese equities drawing increased attention from European allocators seeking experienced long/short managers in the region. Sweeping reforms in the management of companies and a supportive government are providing strong tailwinds. China is slowly returning to the fray with investors in Europe and Asia alike, as managers with exposure to the region post stellar numbers across 2025, catching the eye of those with higher risk appetites.
Outside of equities, we see continued interest from investors both in Europe and Asia for commodity-trading strategies. As many investors struggle to get sufficient volatility into their portfolios, taking standalone commodity strategies across metals, carbon credits, and power has been noticeable with our family office and larger institutional investors expressing this via managed accounts.
Looking elsewhere: non-region-specific global emerging markets macro and debt strategies have seen continued interest, particularly with our Asian-based allocators. The dismal run for trend-following quant strategies had a temporary reprieve, but, at the time of writing, they look to have already been given back so this out of favor trend will likely continue.
The investor environment across Europe and Asia remains in a good place as we head into year end, and it is our consensus this will continue into 2026.
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