Hedge fund managers have been trimming exposure to North America over the last year, reallocating capital toward other regions as concerns over trade frictions, policy unpredictability and a softer U.S. dollar weigh on investor sentiment. A series of reports from leading prime brokerages and conversations with industry participants indicate a clear shift in demand away from U.S.-centric strategies during 2025.
Prime broker findings
Goldman Sachs, JPMorgan, Morgan Stanley and BNP Paribas published reports in January that collectively show investor allocations moving away from North America and toward other markets. Goldman noted in a January report sent to clients that one of the dominant narratives of 2025 was investor focus on diversifying away from the U.S., driven by elevated policy uncertainty and dollar weakening. The report stated: "One of the major market narratives in 2025 was the focus by investors on diversifying away from the US, as a result of heightened policy uncertainty and dollar weakening. Hedge fund portfolios appear to be no exception to this."
That shift has benefited Asia-focused strategies the most. According to the prime broker data, Asia was the strongest-performing region in 2025, and investor appetite for the region at the start of the year reached its highest level since 2022. Goldman’s figures showed Asia allocations were up 13% on a net basis at the start of the year, compared with 7% a year earlier.
By contrast, allocations to North America were rising at a slower pace. The Goldman data indicated North America allocations were set to rise by 7% this year, down from a 14% increase at the start of the previous year.
BNP Paribas’ prime services and capital-introduction team reported that Europe emerged as the most in-demand region among allocators in 2025, with 30% of allocators on a net basis adding hedge fund exposure in the region. BNP also noted a net 23% of allocators added to North America-focused strategies in 2025, a material decline from the 39% who did so in 2024. "This reinforces a theme across 2025 of allocators looking to diversify away from the US," BNP’s Marlin Naidoo and Ashley Wilson wrote in their report.
Megacap sell-offs and rebalancing
Part of the reduced U.S. exposure stems from a pullback in the top megacap stocks. A JPMorgan note dated January 23 reported that long/short funds sold down positions in the so-called "Magnificent Seven" megacap names over the prior three months, reducing holdings from historical highs to a level more in line with the three-year average. The firm’s head of positioning intelligence, John Schlegel, noted a more balanced regional stance among investors compared with the heightened U.S. concentration seen roughly 14 to 15 months earlier. "Unlike 14 to 15 months ago, when practically everyone was heavily invested in the U.S., particularly bearish on Europe, and not as focused on Japan, this time the allocation is much more balanced across regions," Schlegel said. "We’re seeing a renewed willingness to invest in Europe and Japan, rather than a significant pullback from the U.S. overall."
Industry performance and scale
These allocation movements come as global macro funds that pick stocks and trade bonds and currencies have delivered standout results, with some of the best performance in more than a decade reported earlier in January. Hedge fund industry assets exceeded $5 trillion at the end of the prior year, according to data from Hedge Fund Research, marking the highest level since 2007.
How structural is the shift?
Despite the turn away from U.S. concentration in some allocations, several fund managers and asset allocators emphasize that the industry is far from a wholesale reallocation away from North America. They point out that North American financial markets still lead many other global economies by a comfortable margin, and that any move away from U.S. dominance has been measured rather than dramatic.
Bruno Schneller, managing partner at Erlen Capital Management, framed the reduced U.S. bias as a response to an unusual combination of factors. He said the U.S. faces "a fairly unusual mix of policy uncertainty, fiscal concerns, and a maturing earnings cycle." Schneller added that while this does not imply allocators are selling the U.S., the dynamics raise the bar for taking on concentrated risk after a long period of U.S. dominance. "Even if some of these risks fade, the incentive to diversify feels more structural than tactical at this point," he said.
Prime broker data suggest the pace of reallocations has moderated recently. Goldman reported that interest in North America-focused strategies actually fell more sharply in the middle of the previous year before the shift toward other economies moderated; however, demand for Asia continued to strengthen thereafter.
Some allocators and managers caution that claims of a large-scale migration of assets out of the U.S. are overstated. They cite continued U.S. leadership in areas such as artificial intelligence, aerospace and defense, and pharmaceutical innovation as reasons investors remain attracted to American markets. Mario Unali, head of investment advisory at Kairos Partners, captured that view succinctly: "If you look at where investors want to put their money, everything points to the U.S."
Implications for sectors and strategies
- Equity long/short funds have been reducing concentrated bets in megacap names, contributing to a rebalancing of regional exposures.
- Asia-focused managers have been the primary beneficiaries of the reallocation trend.
- Europe has seen renewed interest from allocators, according to BNP Paribas data.
While the move away from U.S.-centric portfolios has been notable, the evidence suggests a nuanced picture: a meaningful rotation toward Asia and Europe coupled with continued recognition of U.S. market strengths, rather than an outright abandonment of North American investments.
Methodology note
The views above are based on recent prime brokerage reports, industry notes and interviews with hedge fund insiders and asset allocators, reflecting reported allocation trends across regions during 2025.