Investor interest: allocator plans for hedge funds in 2025

To explore these dynamics, Marex partnered with Hedgeweek for its annual study on investor sentiment and hedge fund investment trends. Last year’s report reflected a cautious investment environment, with institutions prioritizing risk management and resilience. This year’s findings highlight shifting investor priorities. The key question is whether allocators will translate this sentiment into actual flows.

Following the release of the Investor Interest: Allocator plans for hedge funds and beyond in 2025 report, Hedgeweek hosted a webinar featuring industry experts to examine what’s driving hedge fund demand and where capital is likely to flow in 2025. As moderator, I’m sharing key takeaways from the discussion.

Watch the webinar playback.

Hedge fund exposure: appetite grows, but will allocations keep pace?

Hedge funds are making a comeback in allocator portfolios, with 54% of investors planning to increase exposure – more than double last year’s figure – while only 3% intend to reduce their allocations. The macroeconomic backdrop, higher rates and market volatility have reinforced hedge funds as valuable diversification tools, particularly as alternatives to traditional 60/40 portfolios.

This signals a positive outlook, but actual capital flows remain measured. Mature portfolios in conjunction with liquidity constraints, particularly in private equity and private credit, continue to slow reallocations, with many investors tied up in locked capital structures.

As a result, allocations seem to be rebalancing toward hedge funds selectively and with caution. Rather than broad-based allocations, investors are targeting specific strategies that align with their portfolio objectives. The challenge for hedge funds will be converting this interest into sustained inflows.

Quant and systematic strategies: a shift toward data-driven investing

A standout trend this year is the growing demand for quant and systematic strategies, with 75% of investors planning to increase exposure. Once viewed with skepticism, this data-driven approach is now widely accepted for its ability to generate risk-adjusted returns and capitalize on market inefficiencies – where it may have previously been avoided.

Additionally, demand for macro strategies remains strong with 55% of allocators seeking increased exposure to navigate geopolitical risks and economic uncertainty. Investors see value in balancing both discretionary and systematic styles – using systematic models for their structured, data-driven approach and discretionary managers to capitalize on shifting market conditions and sentiment.

These strategies are increasingly embedded within multi-manager platforms, offering greater stability and risk control. Allocators favor this structured approach, which reduces cyclicality and enhances long-term performance.

The multi-manager landscape, SMAs and emerging talent constraints

Many of the multi-manager platforms have further cemented their role as key players in the institutional allocator arena, delivering consistent performance over the last five years.

This has made access to emerging talent more competitive, pushing investors to rethink their approach. As the industry moves through its cycles, the key question is whether more managers will spin out for independence or remain within platforms for stability.

In addition to multi-managers using SMAs to access talent, SMAs are gaining traction as investors seek customization, transparency and control over hedge fund allocations. While not all allocators can invest via SMAs, sentiment toward co-mingled structures alongside SMA investors has shifted, making it a more widely accepted approach. Alignment remains a key focus, particularly around fees, liquidity terms and potential opportunities.

Market dynamics: the continued strength of private credit

With 65% of allocators planning to increase exposure, private credit remains topical. Investors are drawn to its risk-adjusted return potential and diversification benefits, but manager selection remains critical.

The challenge lies in identifying managers who can consistently generate returns, particularly in benign market conditions where distressed cycles are less pronounced. Investors are increasingly prioritizing experience, fund structure and the ability to navigate high-rate environments, favoring managers with a track record across multiple credit cycles.

As the space matures, allocators are taking a more opportunistic approach, balancing liquidity constraints with access to differentiated strategies. This shift underscores a more nuanced, selective deployment of capital, ensuring that investors capture value across different segments of the credit market.

Conclusion: selective allocations and strategic shifts in 2025

While the hedge fund industry has entered the year with strong investor confidence and enthusiasm for hedge funds is clear, capital deployment remains targeted and nuanced.

At Marex, we play a key role in facilitating these allocations, bridging the gap between hedge funds and our global allocator network. Through our capital introduction expertise, we help managers and investors navigate shifting market conditions and position themselves for long-term success.

A special thank you to all contributors to the Hedgeweek survey and to the panelists who shared their insights in our discussion.

Download the Investor Interest: Allocator plans for hedge funds and beyond in 2025 report and watch the webinar playback here.