Hedge Funds Redirect Capital to Europe & Asia Over U.S.

September 2025 | Asset Flow Report Mid-2025 has seen a notable rotation of hedge fund allocations—Europe captured 37% of new capital, surpassing U.S. strategies this year, with Asia also drawing significant inflows. In contrast, only 14% of investors increased exposure to U.S.-based funds. This migration is fueled by several factors: Europe’s regulatory framework—under the EU’s “Savings and Investment Union”—delivered cross-border efficiencies, while fiscal stimulus in Germany and investments in green and digital sectors enhanced regional appeal. Valuation gaps (20–30% lower prices compared to U.S.), higher dividend yields, and sovereign alignment amid global geopolitical fragility have further shifted risk-adjusted attractiveness. For traders, this spells potential sector rotation trades, particularly in European industrials, green energy, and digital infrastructure. Monitoring fund flows, performance relative to U.S. hedge fund benchmarks, and macroeconomic snapshots from EU policymakers could guide allocations. The trend also suggests a shift in global alpha strategy: Europe is fast becoming a strategic, rather than merely diversification, hub—especially for multi-strategy and opportunistic fund types.

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