Hedge fund industry reaches $4.5 trillion in 2024

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, research firm HFR said on Friday.

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

WHY IT'S IMPORTANT

The growth in hedge fund assets underscores how influential this less regulated and leveraged industry, which uses a vast array of trading strategies and assets, is in markets.

It also shows that hedge funds regained a bit of traction among investors. Hedge funds' net inflows last year totaled $10.47 billion, the first calendar year in which more money came in than out of the industry since 2021. In the last quarter, however, outflows amounted to $12.57 billion.

CONTEXT

Hedge funds' assets have grown by almost 56% since 2015, although the industry has struggled to lure new money from investors. Over the last decade, outflows surpassed inflows by $166.8 billion, showing that funds' performance has driven the industry growth, not new money.

BY THE NUMBERS

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

KEY QUOTE

Kenneth J. Heinz, president of HFR, said 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.

"Total global hedge fund industry capital rose to a fifth consecutive quarterly record as managers, institutions and investors positioned for sweeping policy changes which are likely to have significant and far-reaching implications for U.S. and global financial market structure, regulation and capital," he added.

(Reporting by Carolina Mandl, in New York; Editing by Sharon Singleton)