Hedge Funds Cut North America Stakes Amid Trade, Dollar, and Megacap Struggles
Hedge funds are reassessing their investment strategies as they diversify away from North American markets. This shift stems from ongoing trade tensions, policy uncertainties, and a decline in the value of the U.S. dollar.
Declining Interest in North America
Recent reports reveal that demand for North American-focused hedge fund strategies has decreased over the past year. Major brokerages like Goldman Sachs and JPMorgan highlight this trend, indicating that Asia-focused hedge funds are now attracting more investor interest.
Performance of Asia-Focused Strategies
Investors are increasingly reallocating funds to Asia, which emerged as the best-performing region in 2025. Allocations to Asia have surged, with a 13% increase at the start of the year, compared to 7% in 2024. This indicates a growing preference among allocators to invest outside the U.S.
European Interest Rises
According to a BNP Paribas report, Europe is now the most attractive region for hedge fund investments in 2025. A net 30% of allocator strategies are focusing on this region. In contrast, only 23% of allocators added to North America-focused strategies, a drop from 39% in 2024.
Market Dynamics and Investor Sentiment
Concerns about the U.S. market are driven by recent downturns in major tech stocks, notably the “Magnificent Seven,” which have seen reduced investor interest. John Schlegel from JPMorgan noted a more balanced approach to global allocations, with funds showing renewed interest in Europe and Japan.
Macroeconomic Considerations
Hedge fund assets reached over $5 trillion by the end of 2022, marking the highest levels since 2007. However, the hedge fund industry remains cautious about reallocating substantial assets from the U.S., as it continues to lead in sectors like artificial intelligence and healthcare innovation.
Conclusion
While hedge funds are diversifying their investments, the U.S. market still plays a significant role. The current reallocation trend appears more structural than tactical, suggesting that the appetite for North American assets may remain strong despite ongoing uncertainties in the marketplace.
