Europe's wealthy return to hedge funds offering liquidity
Europe's wealthiest residents are once again pouring money into hedge fund-like products, seeking to tap the industry's standout returns after years of swelling personal fortunes.
As central banks across the continent reduce benchmark interest rates, liquid alternative strategies packaged in retail-friendly structures are drawing affluent investors chasing yields in places other than fixed income. Tailored for a broader European institutional investor base, these products typically allow clients to withdraw their cash frequently - unlike hedge funds that can often lock up capital for years.
Assets in alternative Undertakings for Collective Investment in Transferable Securities (UCITS) - liquid strategies that aim to mimic traditional hedge fund strategies - rose 22% to $287 billion in 2025 from a year earlier, according to data from Kepler Partners. This capped off four straight quarters of growth, the longest stretch in four years, the numbers showed.
The trend is an about turn from just a couple of years ago. Alternative UCITS assets went into a free fall between 2022 and 2024 when a rapid rise in interest rates around that time led to massive inflows into fixed-income assets offering attractive yields.
"In late 2024, we started to see investors reengaging in a meaningful way, and that came through into flows really from the second half of 2025 onwards," said Paul Holmes, global head of distribution at Lumyna Investments, a UCITS fund platform provider with about $23 billion of assets under management. "Now, at least selectively, there's quite a bit of new capital coming in."
Kepler's Absolute Hedge Global Index of UCITS funds gained roughly 7% on average in 2025, its second-best year since the index began in 2010. By comparison, a gauge of investment grade corporate debt returned 3% in 2025, and is down from the two previous years.
Established UCITS player Marshall Wace handed a portion of cash back to investors from its market neutral UCITS funds in January to avoid getting too big, people familiar with the matter said, asking not to be identified discussing private information. US hedge fund HBK Capital Management's multistrategy UCITS fund, which launched in 2023, gained about three quarters of its assets in 2025 alone, and closed to new capital, one of the people said.
A representative for Marshall Wace declined to comment while HBK didn't respond to requests for comment.
The UCITS framework dates back to a 1985 European Union directive aimed at harmonising retail investment funds across its members. It enforces limits on leverage, short exposure and direct trading in assets such as commodities and real estate. Unlike traditional hedge funds, where capital lock-ups can stretch into years, UCITS investors can usually redeem their money on a daily or weekly basis.
Such vehicles gained popularity after 2008, when billions of euros were lost to illiquid hedge fund investments. In the following decade, assets under management swelled to $437 billion in the following decade before losing about $200 billion through the end of 2024, according to Kepler's data.
As central banks across the continent reduce benchmark interest rates, liquid alternative strategies packaged in retail-friendly structures are drawing affluent investors chasing yields in places other than fixed income. Tailored for a broader European institutional investor base, these products typically allow clients to withdraw their cash frequently - unlike hedge funds that can often lock up capital for years.
Assets in alternative Undertakings for Collective Investment in Transferable Securities (UCITS) - liquid strategies that aim to mimic traditional hedge fund strategies - rose 22% to $287 billion in 2025 from a year earlier, according to data from Kepler Partners. This capped off four straight quarters of growth, the longest stretch in four years, the numbers showed.
The trend is an about turn from just a couple of years ago. Alternative UCITS assets went into a free fall between 2022 and 2024 when a rapid rise in interest rates around that time led to massive inflows into fixed-income assets offering attractive yields.
"In late 2024, we started to see investors reengaging in a meaningful way, and that came through into flows really from the second half of 2025 onwards," said Paul Holmes, global head of distribution at Lumyna Investments, a UCITS fund platform provider with about $23 billion of assets under management. "Now, at least selectively, there's quite a bit of new capital coming in."
Kepler's Absolute Hedge Global Index of UCITS funds gained roughly 7% on average in 2025, its second-best year since the index began in 2010. By comparison, a gauge of investment grade corporate debt returned 3% in 2025, and is down from the two previous years.
Established UCITS player Marshall Wace handed a portion of cash back to investors from its market neutral UCITS funds in January to avoid getting too big, people familiar with the matter said, asking not to be identified discussing private information. US hedge fund HBK Capital Management's multistrategy UCITS fund, which launched in 2023, gained about three quarters of its assets in 2025 alone, and closed to new capital, one of the people said.
A representative for Marshall Wace declined to comment while HBK didn't respond to requests for comment.
The UCITS framework dates back to a 1985 European Union directive aimed at harmonising retail investment funds across its members. It enforces limits on leverage, short exposure and direct trading in assets such as commodities and real estate. Unlike traditional hedge funds, where capital lock-ups can stretch into years, UCITS investors can usually redeem their money on a daily or weekly basis.
Such vehicles gained popularity after 2008, when billions of euros were lost to illiquid hedge fund investments. In the following decade, assets under management swelled to $437 billion in the following decade before losing about $200 billion through the end of 2024, according to Kepler's data.
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