Who, if anyone, is still buying hedge funds?
Appetite for hedge funds has been strongest among European asset owners, so far in 2025, while those in other regions seem less keen (Reuters/Yves Herman)
Good morning. Something that has come up in several of my conversations with asset owners lately - often unprompted - has been the question of hedge funds. What, and who, are they for these days? This prompted me to take a bit of a look at the data.
Well, it has definitely been a tough time to be selling hedge funds to asset owners.
As we recently covered, net flows in Europe have been negative for some time (so far in 2025 things are looking a bit better, but not by much) and the situation isn’t much better in America, where so far this year there have been $17m of net outflows.
Well appetite for hedge funds is strongest in Europe which so far in 2025 has posted £500mn of net inflows, according to MandateWire data.
In the US there were net outflows while in APAC there were net inflows of £180mn.
The outflows seen in the US are partly a symptom of a few of the large state funds replicating hedge fund strategies in-house
And of that appetite in Europe, absolutely all of it is coming from pensions rather than from family offices, charities or endowments.
Maurice Ephrati, managing partner of multi-family office Bedrock Capital, said one reason why family offices are no longer keen on hedge funds is simply because there are now more cost effective ways of diversifying.
He said: “Over the past decade, hedge funds have struggled to deliver consistent outperformance after fees, with many tracking public benchmarks.
“Families have increasingly turned to private markets instead, where access, networks, and selectivity can make a real difference in the search for alpha.
“For many, the focus has shifted from paying for stock-picking skill to finding and backing private opportunities they view as more differentiated.”
So why do pension funds in Europe appear more keen on hedge funds still?
Guy Saintfiet, head of EMEA fund management at Aon, said their biggest benefit was “real world diversification”.
He said: “We have found that a thoughtfully constructed and actively managed portfolio of hedge fund strategies,can offer a pathway to genuine diversification and improved portfolio resilience.
“At Aon, we utilise our specialist research capabilities to curate such solutions for clients, offering strong alpha, diversification, and downside protection, in combination with regular liquidity and attractive fee levels.
“We are seeing greater demand than ever for our diversifiers solutions, given our clients’ strong funding improvements and a desire to lock in these positions.”
