Hedge funds have gradually reduced their exposure to North America over the past year, as trade tensions, policy uncertainty, a weaker US dollar and pressure on megacap stocks prompt allocators to rebalance portfolios across regions, according to a report by Reuters.
The report cites prime brokerage data from firms including Goldman Sachs, JPMorgan and BNP Paribas as showing declining demand for North America-focused hedge fund strategies, while interest in Asia and Europe has increased. Goldman said in a January client note that diversification away from the US became a dominant theme in 2025, reflecting heightened policy risk and currency headwinds.
Asia-focused hedge funds were among the main beneficiaries of the shift, with the region delivering the strongest performance last year. Goldman data show Asia allocations rose to 13% on a net basis at the start of 2026, up from 7% a year earlier. By contrast, expected allocation increases to North America slowed to 7%, down from 14% at the start of 2025.
BNP Paribas said Europe was the most in-demand region among hedge fund allocators last year, with 30% adding exposure on a net basis, compared with 23% for North America – a sharp drop from 39% in 2024.
Part of the pullback reflects reduced positioning in US megacap stocks. JPMorgan said long-short equity funds have cut exposure to the so-called Magnificent Seven, bringing holdings back from historical highs to more average levels following recent weakness.
Despite the rebalancing, industry participants stressed that the shift represents diversification rather than a wholesale retreat from US markets. North America remains a core allocation for most hedge fund portfolios, supported by structural strengths in areas such as artificial intelligence, defence and pharmaceuticals.
Several allocators said the move away from US concentration appears increasingly structural rather than tactical, even as the pace of reallocation has moderated in recent quarters. Hedge fund industry assets stood at more than $5tn at the end of 2025, according to Hedge Fund Research, underscoring the scale of capital still anchored in US markets.
