Hedge funds demonstrated their resilience and value as portfolio diversifiers in 2024, returning 10% globally through Q3, according to Preqin 2025 Global Report: Hedge Funds. Despite long-term net outflows, the asset class saw its total assets under management (AUM) climb to $4.9 trillion, driven by strong performance gains amid volatile equity and bond markets.
The report highlights a complex landscape for hedge funds, with fewer new managers entering the market, yet notable growth in niche and multi-strategy funds. Investor sentiment appears to be cautiously optimistic, with improving interest in hedge funds’ risk mitigation benefits, even as overall capital outflows persist.
Dive into the highlights of Preqin’s findings to uncover key trends shaping the hedge fund industry in 2024 and beyond.
Executive Summary
"Hedge funds proved again to be a steady hand in a volatile year" - Charles McGrath, Associate Vice President, Research Insights at Preqin
Key Figures
- $4.88tn in hedge fund assets under management (AUM) as of Sept. 30, 2024, up 7.7% from the start of the year.
- $8.4bn in net outflows over the four quarters ending Sept. 30, 2024.
- $25.5bn hedge fund inflow in Q3 2024, the highest since mid-2021.
- 10.1% return on the Preqin All Hedge Fund Index in the first nine months of 2024.
- 3.6% annual growth in multi-strategy fund launches since 2017.
- 30,000+ active hedge funds in the market.
- 50% of investors plan to maintain current allocations, with an uptick in those looking to add allocations in the near term.
Chart Of The Year
“Investors are speaking with their allocations, showing favor to diversifying strategies over higher return funds.”
Global hedge funds have distributed a net $296bn to investors over the past five years. Such a high level of outflows could very well be attributed to falling demand for hedge funds, with asset growth drifting towards an equilibrium between investor demand and manager supply.
Stepping down to the strategy level reveals that these outflows have not been uniform, and each hedge funds strategy has been impacted differently. Investors consistently tell Preqin they value hedge funds because they are less correlated to other asset classes – notably public equities – yet to varying degrees. The relationship between each strategy’s position on that spectrum vs. the subscriptions and distributions to those fund groupings reveals a pattern of investor behavior of capital flowing into funds that meet these goals and away from those that don’t.
Year in Review
Equity forward hedge funds lead asset class returns as AUM reaches $4.88tn
2024 was eventful for global markets, which at times swung heavy on policy (or the hint of policy), economic data, and global politics. Through these oscillations, markets found a way to march higher. As inflation in the US, UK, and the European Union continues to drift towards their long-term 2% targets, central banks have become more comfortable with lowering their base rates.
Global equities were up 19.1% through the first nine months of 2024, and 33.0% over the 12 months ended September 30. Global debt found itself on the mend after several years underwater, with the Bloomberg Global Aggregate index up 3.6% in the nine months to September 30. Commodity markets swung on both macroeconomic factors as well as geopolitics, with metals and energy driving returns for better or for worse over much of the year.
Markets have shown that they can quarantine geopolitical risk over the long term with the continually escalating conflict in the Middle East causing only brief shocks, particularly in energy markets. Economic concerns in key regions such as China have also impacted markets over the past year as the region continues to struggle to grow, while the results of the of the US election also have the potential to further impact the local and global economy.
Hedge fund performance
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North America dominates AUM
Global hedge fund AUM rose to $4.88tn by the end of September 2024, a 7.73% increase from the start of the year (Fig. 1.9). The quarter also marked the seventh consecutive quarter of positive growth. Over the trailing four quarters, assets were up 11.5%, the best 1-year asset growth figure since the third quarter of 2021.
North America-based hedge fund assets stood at an estimated $3.95tn and made up about 81% of global AUM, leading the major global regions during the first nine months of the year. Europe was the next largest region with $746.6bn, or 15.3% of global assets as of September 30. The geographic distribution of hedge fund assets has drifted more in favor of North America over the past decade as managers based in the region continue to consolidate assets at the expense of their Europe- and APAC-based peers.
At the strategy level, global macro funds remain the largest category by AUM with an estimated $1.41tn in net assets (Fig. 1.10). The strategy benefited during the post-pandemic period as investors looked for steady performance from funds that capitalized particularly on volatile interest rates, currencies, and commodities. More recently, asset growth has lagged the larger asset class. The 5% year-to-date increase was below the total asset class growth and well below relative value and equity funds, which were up 13.2% and 10% through September 30, respectively.
Asset growth should be expected to grow unevenly across individual hedge fund strategies as markets bring each into and out of favor. Outflows are a major theme across the hedge fund space – and this report – as investors look to position their portfolios against potential tail events, eschewing even the better-performing strategies for lower-volatility options with a greater focus on risk-adjusted, rather than absolute, performance.
Hedge funds: Preqin’s forecasts through 2029
Fund performance to carry hedge fund growth into 2029 as the asset class becomes more lean
Hedge funds assets are projected to reach $5.73tn by 2029 (Fig. 2.1). Over the forecast period (end-2023–2029F) those assets are expected to exhibit an annual nominal growth rate of 4.01%, nearly identical to the growth rate that brought global assets to $4.53tn at the end of 2023.
See the full report here by Preqin.
About Preqin
Preqin, the Home of Alternatives™, empowers financial professionals who invest in or allocate to alternatives with essential data and insight to make confident decisions. It supports them throughout the entire investment lifecycle with critical information and leading analytics solutions. The company has pioneered rigorous methods of collecting private data for over 20 years, enabling more than 200,000 professionals globally to streamline how they raise capital, source deals and investments, understand performance, and stay informed. For more information visit www.preqin.com.
