Global hedge fund assets soared to a record $4.51tn at the start of 2025, marking the fifth consecutive quarter of growth, as investors and fund managers positioned for sweeping policy changes under the Trump administration, according to the latest HFR Global Hedge Fund Industry Report.
The industry added $53.5bn in the fourth quarter of 2024 and $401.4bn over the full year – the highest annual growth in assets under management (AUM) since 2021. Despite the robust capital increase, Q4 saw a net outflow of $12.57bn, though 2024 still ended with a net inflow of $10.47bn – the first positive calendar year of net inflows since 2021.
Hedge fund performance in 2024 was led by directional strategies, particularly equity hedge and event-driven funds, with the HFRI Fund Weighted Composite Index gaining 9.8% for the year, and the HFRI Equity Hedge (Total) Index leading all strategies with a 12.0% return, closely followed by event-driven strategies closely followed, posting an 11.6% gain.
The volatile HFR Cryptocurrency Index was the standout performer, surging 59.1% in 2024, reflecting increasing investor interest in digital assets.
Relative Value Arbitrage (RVA), a strategy sensitive to credit and interest rate movements, saw the largest increase in strategy-level capital during Q4, growing by $20.5bn to reach $1.22tn in total assets. Multi-Strategy funds led the charge, adding $11.9bn in the quarter.
Equity hedge strategies crossed the $1.3tn milestone for the first time, with capital increasing by $14.2bn in Q4 and $126.7bn for the year. Sub-strategies such as fundamental value funds drove this growth, benefiting from a favourable market environment.
Event-driven strategies also saw a significant boost, with assets growing by $10.3bn in Q4 and $120.4bn for the year. Distressed/Restructuring strategies were the top contributors, gaining $7.1bn in the final quarter of 2024.
Macro strategies, which often thrive during periods of volatility, added $8.6bn in Q4 despite experiencing $7.2bn in net outflows. Total Macro capital reached $711.3bn by year-end, driven by multi-strategy and systematic diversified funds. The HFRI Macro (Total) Index gained 5.65% in 2024, with the HFRI Macro: Multi-Strategy Index up 7.8%.
Investor outflows in Q4 were spread across firms of all sizes. Large firms managing over $5bn saw outflows of $9.6bn, mid-sized firms managing $1bn-$5bn experienced $1.2bn in outflows, and smaller firms managing under $1bn saw outflows of $1.7bn. For the full year, however, large firms reported inflows of $9.4bn, while smaller firms recorded $7.2bn in net inflows.
“Hedge fund managers and institutional investors are positioning for sweeping policy changes likely to reshape the global financial market structure,” said Kenneth J Heinz, President of HFR, noting the sector’s focus on cryptocurrency acceptance, an active M&A cycle, and shifts in geopolitical uncertainty. “As we move into 2025, investors are preparing for volatility and rapid market cycles by allocating to funds designed to deliver strong, opportunistic performance while providing defensive portfolio protection amid political and economic changes,” he added.
