Institutional appetite for hedge funds is holding firm – and even gaining relative ground – as big investors scale back enthusiasm for passive equities and private credit, according to a report by Reuters citing the findings of Goldman Sachs’ latest allocator survey.

The July poll of 333 institutions overseeing more than $1tn in assets — including pension funds, endowments and sovereign wealth funds — found that 37% plan to increase hedge fund allocations in H2 2025, unchanged from the first half, while only 6% expect to trim exposure, down from 10% previously. Goldman’s prime brokerage unit noted that hedge funds were the most favoured asset class in the survey.

By contrast, passive equities are seeing a sharp pullback, with 27% of respondents aiming to reduce exposure in the second half, up from 19% earlier in the year, as tariff shocks and stagflation fears dent market sentiment. Private credit — a long-standing favourite among institutional allocators — is also losing momentum: only 31% plan to commit fresh capital in 2025, down from 41% a year ago, amid concerns over opaque valuations and slowing economic growth.

Goldman observed that while investor interest in hedge funds remains high, actual capital flows are still constrained by liquidity issues. Many allocators are tied up in private market commitments that have yet to return cash, limiting their ability to deploy into new strategies. That said, the bank noted anecdotal signs that these liquidity pressures may be starting to ease.