European equities are stepping into the spotlight as hedge funds rethink their global strategies amid an uncertain macroeconomic backdrop.

As hedge funds continue to navigate this volatile and uncertain backdrop, Europe has emerged as an attractive destination for capital allocation, most notably across equities. A Goldman Sachs note seen by Reuters that was sent to clients last month, outlined that hedge funds had piled into bets against US shares and emerging market stocks in Asia, as they wagered that European shares would rise.

The gradual shift of focus into Europe has accelerated in recent years. US equity gains remain heavily concentrated in the ‘Magnificent Seven’, leaving the market top-heavy and potentially vulnerable to external shocks. European equities offer broader sector representation compared to the US; there is a greater exposure in banks, industrials, and natural resources.

Thomas Horsey, equity portfolio manager and Thomas Kramer, investment director at Wellington Management noted in a research report last September that Europe’s ongoing structural evolution, underpinned by domestically focused companies across a diverse sector base, presents a compelling opportunity set.

One fund that has navigated the recent volatility well is Vigama Capital,