(HedgeCo.Net) The liquid alternatives asset class is showing signs of renewed life, as investors regain appetite for flexible, diversified strategies amid macro uncertainty. According to a semiannual study by Lupus Alpha, liquid alternatives recorded €6.9?billion in net inflows in the first half of 2025—marking a clear turnaround after years of outflows. Lupus Alpha+1
Much of that inflow has concentrated in lower-volatility, fixed-income oriented strategies: the Absolute Return Bond and Alternative Credit Focus strategies together attracted nearly €4.9?billion. Lupus Alpha+1 Defensive equity styles such as market-neutral or long/short also saw increased allocations. Lupus Alpha+1
However, performance painted a more nuanced picture. On average, funds in the segment delivered a –1.87% return (in euro terms) over the period—driven primarily by the strength of the U.S. dollar relative to the euro (~14% depreciation) which weighed heavily on unhedged global strategies. Lupus Alpha+1 Net new capital inflows nearly offset outflows/market drags, so total AUM slipped only modestly—from €243.2?billion to €241.8?billion. Lupus Alpha+1
This rebound suggests investors are rethinking the role of liquid alts—not as niche “hedge fund proxies,” but as core diversifiers that can deliver uncorrelated sources of return. The capital flow revival also coincides with growing product innovation, especially in ETF?style wrappers and semi-liquid structures (see later stories).
Still, challenges remain. Currency effects underscore that performance for non?U.S. investors may diverge materially. Some more volatile strategies (e.g. global macro, managed futures) continue to face headwinds and outflows. HedgeCo.Net+1
Looking ahead, the ability of liquid alternatives to sustain inflows will depend on manager skill in controlling volatility, delivering differentiated returns, and offering liquidity features that resonate in uncertain markets. The revival in 2025 is encouraging—but the real test will come during fresh cycles of market stress.