(HedgeCo.Net)Liquid alternative strategies have seen a revival in investor interest in 2025, reversing a multi?year trend of outflows. According to a semiannual study by Lupus Alpha (drawing on LSEG Lipper data), liquid alts attracted €6.9 billion in net inflows in the first half of the year. lupusalpha.com+1 Much of this interest was concentrated in relatively lower?volatility, fixed income–oriented alternatives.
The lion’s share of capital moved into Absolute Return Bond and Alternative Credit Focus strategies, which together accounted for nearly €4.9 billion. hedgeco.net+1 Defensive equity flavors — such as market neutral and long/short equity — also benefitted from renewed allocations. hedgeco.net However, the broader liquid alts universe delivered only modest negative returns in euro terms: the average fund returned –1.87%, largely due to the strong depreciation of the US dollar (around –14% vs. euro) which weighed heavily on unhedged global strategies. lupusalpha.com+2hedgeco.net+2
Despite the negative performance, the inflows were strong enough to nearly stabilize total assets under management (AUM), with a small net decline from €243.2 billion to €241.8 billion. lupusalpha.com+2hedgeco.net+2 The fact that eight out of fourteen strategy types saw net inflows underscores a broadening interest across the liquid alts spectrum. lupusalpha.com+1 Institutional share classes accounted for about 49.5% of inflows, only slightly below late?2024 levels. hedgeco.net+1
Implications & outlook
Analysts view this capital revival as a barometer of growing risk awareness among allocators. After years of confidence in equities and bonds, macro uncertainty—fed by tariff tensions, interest rate pressures, and geopolitical risk—appears to be nudging investors toward strategies that offer alternative sources of return. ETF Express+3hedgeco.net+3lupusalpha.com+3
However, the rebound is uneven. Some strategies (e.g. global macro, managed futures) continue to face net outflows. lupusalpha.com+1 And the return drag from currency effects highlights that performance in local currency terms can significantly differ for investors outside the U.S. lupusalpha.com+2lupusalpha.com+2
Going forward, success for liquid alts managers will hinge on execution, transparency, and adaptability. New product structures (e.g. ETFs, hybrid wrappers, managed accounts) that reduce frictions and provide better liquidity may help attract further retail and intermediary demand. Already, firms like SEI are converting multi?strategy mutual funds into ETF wrappers to broaden distribution. ETF Express
In sum, the inflow reversal in 2025 may mark a turning point: liquid alternatives are no longer a sidelined niche but are increasingly viewed as a legitimate diversifier in modern portfolios.