In 2025, there has been a significant shift in investment preferences, with investors showing a stronger inclination towards hedge funds rather than returning to private equity. This change is largely due to the decline in the number of deals, as noted in a report from BNP Paribas (EPA BNP).

Market Concerns Risk Mitigation Strategies

Leading investment institutions are exercising caution amid potential deterioration in public market conditions. This cautious approach stems from the desire to entrust assets to those capable of effectively managing them in times of volatility:

1. Hedge Funds as an Alternative: Investors are seeking funds that have demonstrated an ability to operate contrary to widely recognized market trends.

2. Stability Considerations: Strategies less susceptible to fluctuations are gaining traction.

Capital Shifts An Analysis of Fund Outflows

Despite the traditional trend of capital outflow from underperforming hedge funds, 2024 and 2025 witnessed a significant withdrawal of $52 billion from even the most successful funds. This phenomenon is explained by several factors:

- Pension funds and universities chose to divest from successful investments to support direct investment and venture capital portfolios.

- The rising costs associated with maintaining these portfolios led to the necessity of reallocating resources.

Private Deals Slowing Down in 2025

The volume of deals required for private equity to realize returns has yet to reach optimal levels. According to a report by S&P Global Market Intelligence $SPGI, the global volume of private equity and venture capital deals in January 2023 was $35.28 billion, reflecting a decrease of $70 million compared to January 2024.

In the context of current market conditions, hedge funds are emerging as the preferred investment option, offering a strategy for diversification and risk minimization. Investors are adapting to changes and seeking ways to stabilize returns amidst volatile market dynamics.