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Sustained strong performance by hedge funds so far this decade will spur increased allocations in 2025, according to a survey of 325 investors by Barclays’ prime consulting team.
A net 30% of respondents, drawn from firms representing almost a quarter of the capital invested in hedge funds, said they expected to increase allocations in 2025 – up from 25% last year.
In private credit allocations, a net 26% more expected higher allocations than lower. The figure was 17% for PE/venture capital and negative in long-only traditional allocations (-13% in fixed-income and -4% in equities).
The lower fixed-income figure suggests hedge funds could be set to prosper by replacing bond market allocations going forward.
“Hedge fund flows were marginally positive in 2024, and we expect increased investor enthusiasm and allocation activity in 2025,” said Roark Stahler, US head of strategic consulting at Barclays.
Looking at allocation plans by investor type, pensions and insurance told Barclays they expect to have a year-over-year allocation increase, upping from 9% to 19% on a net basis.
Endowments and foundations and sovereign wealth funds also plan to increase hedge fund allocations, from +21% to +25% net allocators.
Statistical arbitrage, a quant approach using models to profit from price discrepancies between securities, and multi-manager funds were the biggest targets for inflows.