​The hedge fund industry has entered a period of renewed strength, supported by a powerful combination of rising assets, substantial inflows and solid performance across several core strategies. Global industry assets have climbed to almost five trillion dollars by the third quarter of 2025 according to HFR, marking the eighth consecutive quarterly increase and the strongest accumulation of capital since before the global financial crisis. Inflows have been driven by a clear shift in allocator behaviour. Investors have been repositioning portfolios to cope with conflicting macro signals, ranging from uneven global growth and persistent policy divergence between major central banks to elevated bond market volatility and ongoing geopolitical tensions. With the traditional balance between equities and bonds failing to provide reliable protection in this environment, institutions have been turning to hedge funds as a source of active risk management and diversification.

The past two weeks have brought a notable recalibration in US macro expectations, with direct consequences for European markets. The end of the government shutdown removed immediate fiscal uncertainty, but the accumulated delay in key releases - most importantly labour-market indicators and core inflation data - left policymakers and investors operating without the usual reference points. As these figures begin to return, the Federal Reserve has adopted a more tempered tone, prompting markets to rethink the likelihood of a December rate cut. Current pricing assigns a 43% probability to such a move, down from effectively 100% one month ago when investors were contemplating the possibility of deeper easing. This shift, combined with firmer Treasury yields, underscores a market still grappling with uneven economic signals, particularly around labour-market resilience. Geopolitical tensions remain present but secondary, adding a marginal layer of caution rather than driving sentiment directly. For Europe, the more significant channel is policy divergence. While the ECB maintains its current stance and observes softening regional indicators, the evolving US trajectory complicates expectations for 2026 and beyond. The resulting environment has contributed to higher cross-asset volatility and a more defensive investor tone, as both regions confront a landscape where policy clarity remains limited and incoming data may still produce outsized market reactions.

​Over the past month, monetary policy across major developed economies has entered a more nuanced phase, with rate-cut cycles largely paused as central banks assess the balance between easing inflation and maintaining credibility. In the US, the Federal Reserve recently lowered its policy rate to 3.75-4%, delivering a long-anticipated cut aimed at supporting growth amid moderating inflation. However, Chair Jerome Powell struck a notably cautious tone, emphasising that additional cuts in 2025 are unlikely unless economic conditions deteriorate meaningfully, as core inflation and wage pressures remain elevated. Across the Atlantic, the European Central Bank has kept its deposit facility rate steady at 2%, marking a pause in its earlier easing cycle as policymakers monitor the resilience of the Eurozone economy and the transmission of previous cuts through credit markets. In Switzerland, the Swiss National Bank continues to maintain its policy rate at 0 %, reflecting a benign inflation environment and a strong franc that has helped contain import prices. Meanwhile, the Bank of England has taken a more conservative stance, holding its base rate at 4% amid budgetary constraints and lingering concerns over fiscal credibility, signalling that further reductions are unlikely in the near term. Collectively, these developments suggest that while the global tightening phase has clearly ended, central banks are now entering a period of cautious calibration, prioritising stability and inflation control over aggressive monetary accommodation. Figure 1 summarizes the development of interest rates and inflation rates of the aforementioned economies.