Institutional Momentum Lifts Hedge Funds, Luxembourg Consolidates Leadership 2z5136

By Samira Farzad, Head of Business Development, HF Quarters

Hedge funds are experiencing renewed momentum, as institutional investors expand allocations in pursuit of diversification and improved risk-adjusted returns. Pension funds, insurers, and sovereign wealth vehicles are driving the shift, with surveys suggesting that a notable proportion plans to increase exposure by 10% or more until 2027. After a muted 2024, 2025 has brought a resurgence in demand, particularly for systematic and multi-strategy funds, along with macro strategies positioned to navigate policy and geopolitical volatility. The industry is also seeing increasing volumes of assets under management.

In Europe, Luxembourg remains a cornerstone of the hedge fund industry. With EUR 5.5 trillion in regulated fund assets and continued growth in ESG vehicles, up by more than 12% since 2022, the country is consolidating its leadership in sustainable finance. The rollout of ELTIF 2.0 has further reinforced its role in private markets, while Luxembourg’s adaptable legal structures the broader inclusion of retail investors in alternative strategies. Its regulatory credibility continues to attract global managers seeking both flexibility and scale, making the country an ideal destination for funds.