Hedge funds see changing capital flows and focus

Hedge funds have recently exhibited a marked shift in positioning, reflecting evolving market conditions and strategic recalibrations.

Bullish exposure to Asian markets has climbed to its highest since September 2024, indicating renewed confidence in the region’s underlying fundamentals and emerging opportunities.

On the sector front, funds could rotate away from technology sectors, notably semiconductors and chip equipment, following strong gains earlier in the year. Capital could be redirected towards financial stocks and others, suggesting a preference for value and cyclical assets in the context of lingering macroeconomic uncertainty.

As result, performance across fund strategies remains uneven. Thus, systematic, trend-following approaches have struggled to navigate the current environment, while discretionary macro managers have leveraged their tactical agility to deliver positive returns.

Hedge funds could remain attentive to current driving factors such as monetary policy and trade policies in the US in addition to geopolitical tensions in the Middle East. Combined, thesse factors, could continue to drive uncertainty and volatility, which could create risks and opportunities for hedge funds as market conditions change rapidly.