The largest hedge funds now control nearly three-quarters of the entire industry, with multi-strategy firms attracting the vast majority of business, according to a report by Reuters citing data from Bank of America.
The bank’s analysis reveals that hedge funds managing over $5bn in assets increased their industry share to 73% by the end of the second quarter of 2024, up from 65% in 2018, with this growth seemingly coming at the expense of mid-sized firms – $1bn-$5bn in assets – which have seen their share shrink by 6% over the same period.
Bank of America noted that multi-strategy hedge funds in particular are playing a key role in this shift.
The findings are based on a survey of 160 hedge fund investors, representing around $680bn in assets, including pension funds, family offices, sovereign wealth funds, and funds of hedge funds.
Nearly half of those surveyed expressed plans to increase both their capital allocation to hedge funds and the number of hedge funds in their portfolios. However, about 6% of investors indicated they intend to reduce their hedge fund investments, opting instead for alternatives such as private equity or private credit.
The survey found that larger investors were more likely to follow through on plans to partially or fully exit hedge fund investments. Additionally, two-fifths of the investors agreed with their hedge funds that fees would only apply if performance surpassed a certain “hurdle rate.” These hurdle rates are often based on the risk-free rate, an agreed-upon price, or equity indices.
