Key Takeaways
- • Union Investment's Jonas Hörsch says German hedge fund sentiment is shifting on two fronts: local allocators are warming and top talent is emerging domestically.
- • According to the German Alternative Investment Association (BAI), the share of German investors allocating to hedge funds rose from 15% last year to 21% this year, with 38% planning to increase allocations versus 5% planning to reduce.
- • Hörsch attributes two decades of underperformance in German hedge fund adoption to risk aversion, a poor reputation dating to the early 2000s "Heuschrecken" label, and a preference for private equity and real estate, which now account for almost a third of institutional portfolios.
- • Rising concern among allocators over AI-driven equity concentration and the size of private markets exposure is prompting reassessment of hedge funds as a source of differentiated alpha.
- • Union Investment's Hörsch leads a seven-person team running market-neutral strategies with notional exposure reportedly well above $1bn, and co-manages the UniInstitutional Equities Market Neutral fund (around EUR320m in assets, launched 2019).
Summary
According to Hedgeweek, Union Investment's Jonas Hörsch, head of liquid alternatives and senior portfolio manager on the firm's fundamental long/short strategy, believes German hedge funds have been held back for roughly two decades by a culture of risk aversion and a poor reputation, and that the tide is now turning. He points to growing interest from allocators and the emergence of local talent as evidence of the shift.
BAI data supports this view. The share of German investors allocating to hedge funds rose from 15% last year to 21% this year, and 38% of respondents plan to increase allocations against 5% planning to reduce. Hörsch argues that German investors have historically prioritised capital preservation, with hedge funds seen as excessively speculative. A 2019 BAI study identified public perception, transparency and performance as the three largest obstacles for German hedge fund investors. German allocators instead moved quickly into private equity and real estate, which now make up almost a third of institutional portfolios. Hörsch notes that Germany has long had strong local private equity managers, more so than local hedge fund managers.
The reputational problem traces to the early 2000s, when German politicians compared hedge funds to Heuschrecken, or swarms of locusts. Hörsch says the remark targeted corporate raiders but nonetheless damaged the reputation of absolute return strategies more broadly.
Allocators now have renewed reasons to reconsider. Global hedge fund AUM has reached record highs above $5tn in 2026, and Hörsch describes strong inflows and growing platforms industry-wide. Concentration risk is a further driver: Hörsch says allocators have voiced concern about portfolio dependence on AI-linked mega trends and limited diversification, and some are uneasy about the size of their private markets allocations. He argues that the "wild west" stigma is fading and that hedge funds are being reassessed for their diversifying alpha sources.
Hörsch also links talent development to local demand, saying "local interest attracts talent locally." He suggests Brexit may have encouraged a continental European hub, though he says he did not move to Frankfurt for that reason. Hörsch concludes that Germany's success depends on whether it shifts from preserving wealth to taking calculated risks, adding that "the jury is still out." He says Union Investment's liquid alternatives build-out is a small contribution to that effort.
BAI data supports this view. The share of German investors allocating to hedge funds rose from 15% last year to 21% this year, and 38% of respondents plan to increase allocations against 5% planning to reduce. Hörsch argues that German investors have historically prioritised capital preservation, with hedge funds seen as excessively speculative. A 2019 BAI study identified public perception, transparency and performance as the three largest obstacles for German hedge fund investors. German allocators instead moved quickly into private equity and real estate, which now make up almost a third of institutional portfolios. Hörsch notes that Germany has long had strong local private equity managers, more so than local hedge fund managers.
The reputational problem traces to the early 2000s, when German politicians compared hedge funds to Heuschrecken, or swarms of locusts. Hörsch says the remark targeted corporate raiders but nonetheless damaged the reputation of absolute return strategies more broadly.
Allocators now have renewed reasons to reconsider. Global hedge fund AUM has reached record highs above $5tn in 2026, and Hörsch describes strong inflows and growing platforms industry-wide. Concentration risk is a further driver: Hörsch says allocators have voiced concern about portfolio dependence on AI-linked mega trends and limited diversification, and some are uneasy about the size of their private markets allocations. He argues that the "wild west" stigma is fading and that hedge funds are being reassessed for their diversifying alpha sources.
Hörsch also links talent development to local demand, saying "local interest attracts talent locally." He suggests Brexit may have encouraged a continental European hub, though he says he did not move to Frankfurt for that reason. Hörsch concludes that Germany's success depends on whether it shifts from preserving wealth to taking calculated risks, adding that "the jury is still out." He says Union Investment's liquid alternatives build-out is a small contribution to that effort.
Go deeper than the headline
Research every firm in this story, track the ones that matter and get the daily briefing — free for 7 days.