Hedge fund allocations are rising as institutional investors seek to navigate growing macroeconomic and geopolitical risks, according to the latest Manager Intelligence and Market Trends report from global investment consultancy bfinance.
In the 12 months to March 2025, hedge fund mandates accounted for a growing share of diversifying strategies, with investor interest intensifying in market-neutral, event-driven, and alternative risk premia strategies. Hedge fund mandates made up a significant portion of the 13% of total searches allocated to diversifying strategies, buoyed by strong Q1 returns—alternative risk premia strategies alone returned +3.7%.
“As volatility returns and the traditional 60/40 portfolio faces renewed pressure, we’re seeing allocators re-engage with hedge fund styles that offer low correlation and adaptive return streams,” said Oliver Wade, Associate at bfinance. “Macro and trend-following strategies struggled in Q1, but systematic, beta-neutral strategies showed real resilience.”
Institutional investors are also recalibrating portfolios in response to macro shocks, including renewed tariffs and inflation concerns. As a result, cash positions have increased and uncorrelated hedge fund strategies have gained appeal as both a portfolio hedge and a source of consistent alpha.
Private markets continued to dominate overall mandate activity, representing 50% of manager searches. But it’s the hedge fund space that is showing renewed vitality as allocators prioritise precision risk control and downside protection.
