Hedge Fund Assets Surge to $4.31 Trillion in Q2 2024 as Macro Strategies Lead Growth

Global hedge fund assets grew for the seventh consecutive quarter in Q2 2024, surpassing the previous record of $4.3 trillion and reaching $4.31 trillion, according to HFR’s latest data. The industry saw a quarterly increase of approximately $11 billion, driven by performance-based gains and inflows into relative value arbitrage and macro strategies. However, equity hedge and event-driven strategies experienced outflows during the same period.

The HFRI Fund Weighted Composite Index rose by 5.0% in the first half of 2024, with strong performances in equity hedge and uncorrelated macro strategies. Similarly, the HFRI Asset Weighted Composite Index gained 5.1%, signalling slight outperformance by larger funds. The HFR Cryptocurrency Index returned 25.5% in H1, although its Q2 performance moderated after an impressive 45.3% surge in Q1.

Interest rate and geopolitical uncertainties led credit- and interest rate-sensitive relative value arbitrage strategies to perform well, with RVA capital rising by $30.3 billion in Q2, bringing the total to $1.16 trillion. Multi-strategy funds led the RVA asset increases, with inflows of $10.3 billion. These strategies outperformed, with the HFRI Relative Value Index gaining 3.9% in H1 2024.

Macro strategies also saw capital inflows, with $4.4 billion added in the first half of 2024, primarily directed into multi-strategy funds, which attracted $5.0 billion in new investments. The HFRI Macro Index Asset Weighted Index rose 6.1%, although Q2 was relatively stable after the substantial Q1 gains.

Event-driven strategies faced challenges, seeing a small capital decrease of $7.9 billion in Q2, reducing total capital to $1.20 trillion. Despite this, event-driven strategies still experienced an overall increase of $40 billion in H1. The decline in event-driven capital was largely driven by reductions in shareholder activism and special situations strategies, which saw decreases of $6.7 billion and $2.6 billion, respectively. However, the HFRI Event-Driven Index gained 4.2% in the first half of the year.

Equity hedge strategies also saw a drop in capital, losing $11 billion in Q2 after a significant surge in Q1. This reduced total equity hedge capital to $1.24 trillion. Fundamental value funds saw the largest declines, with a drop of $9.2 billion, while the HFRI Equity Hedge Index gained 6.1% in H1 2024.

Smaller and newer hedge funds benefitted from inflows of $3.0 billion in Q2, contrasting with outflows from larger firms. The largest funds, managing over $5 billion, saw net outflows of $5.7 billion, while mid-sized firms managing $1 billion to $5 billion experienced outflows of $6.7 billion. However, the largest funds experienced inflows of $8.7 billion in H1 2024.

Kenneth J Heinz, President of HFR, noted that while hedge fund capital continued to rise, the composition of growth had shifted. Fixed income, credit, arbitrage, multi-strategy, and macro funds led the way in asset increases, reflecting growing geopolitical and economic risks. These factors, including volatile inflation, interest rates, and the uncertainty of upcoming elections, have contributed to a more balanced risk sentiment in Q2. As investors seek strategies to navigate these uncertainties, those who have successfully managed these risks are likely to attract increased institutional commitments.