Hedge Fund Industry Overview

By Carolina Mandl

NEW YORK (Reuters) – The hedge fund industry ended 2024 with $4.51 trillion in assets under management, a 9.75% increase from the previous year, according to research firm HFR.

Total assets increased by $401.4 billion last year, marking the highest growth since 2021, mainly driven by a strong performance across various strategies.

Why It’s Important

The growth in hedge fund assets highlights the influence of this less regulated and leveraged industry, which employs a wide array of trading strategies and assets.

Additionally, it indicates that hedge funds regained some traction among investors, with net inflows totaling $10.47 billion last year—the first year since 2021 that saw more money coming in than going out. However, outflows in the last quarter amounted to $12.57 billion.

Context

Since 2015, hedge fund assets have grown by almost 56%, even though attracting new money has been a challenge. Over the last decade, outflows exceeded inflows by $166.8 billion, suggesting that the industry’s growth has largely been driven by performance rather than new investments.

By the Numbers

On average, hedge funds posted a 9.83% gain for investors in 2024, according to the HFRI Fund Weighted Composite index, with positive results seen in equity, macro, event-driven, and relative value strategies. This compares to a 23.3% return of the S&P 500.

Key Quote

Kenneth J. Heinz, president of HFR, stated that portfolio managers are “preparing for a wide range of market cycles, with the possibility for volatility and dislocations as investors adapt to new policies regarding interest rates, inflation, legislation, and tariffs” in 2025.

He further noted, “Total global hedge fund industry capital rose to a fifth consecutive quarterly record as managers, institutions, and investors positioned for sweeping policy changes likely to have significant implications for U.S. and global financial market structure, regulation, and capital.”