Europe’s high-net-worth investors are once again turning to alternative UCITS funds – liquid hedge fund-style products – drawn by strong returns and the flexibility to access capital quickly, according to data from Kepler Partners.
Assets in alternative UCITS funds, which are designed to mimic traditional hedge fund strategies while offering daily or weekly liquidity, grew 22% to $287bn in 2025, marking four consecutive quarters of inflows, the longest streak in four years. UCITS funds appeal to investors seeking hedge fund returns without long lock-ups, increasingly relevant as European central banks cut benchmark interest rates.
The Kepler Absolute Hedge Global Index of UCITS funds posted average gains of roughly 7% in 2025, compared with a 3% return for investment-grade corporate debt. Some managers, including Marshall Wace, returned cash to investors to manage fund size, while HBK Capital Management saw about three-quarters of its UCITS assets raised in 2025 alone.
The UCITS framework, originating from a 1985 EU directive, limits leverage, short exposure, and direct commodity or real estate trading.
Investors are also increasingly comparing UCITS with traditional hedge funds, which often have multi-year lock-ups and higher fees. “Lots of hedge funds now have longer lock-ups, higher fees, less transparency — to allocators, that’s looking a lot like private equity exposure,” said Julia Rees Toader of PrinCap Partners. UCITS funds, by contrast, allow for more flexible access while offering similar strategies.
New UCITS launches surged last year, with over two dozen funds raising roughly $2.4bn. Managers such as Bridgewater Associates and Capital Fund Management introduced daily-dealing products, while others, including Millennium Management and WorldQuant, explored similar launches.
Despite the rebound, the market is increasingly concentrated among established players. Smaller or “sub-scale” UCITS funds face higher scrutiny, with investors demanding truly differentiating strategies. Some funds are now targeting higher volatility returns of 8–10%, reflecting evolving investor appetite compared with the lower-volatility focus seen during zero-rate periods.
