Overall returns lagged global public equities at 19 per cent (MSCI World Index), but handily beat public debt at 4 per cent, as measured by the Bloomberg Global Aggregate index.

Net inflows in the first three quarters stood at $19.2 billion.

And in one of the most eye-catching figures, Preqin said North American hedge funds dominate the rest of the world in terms of assets under management – more than 81 per cent, with Europe at 15 per cent and Asia-Pacific barely making it into the frame, at 3 per cent. 

Hedge funds retain important wealth management tools. While they haven’t always matched stock market returns – incurring scepticism of renowned investor Warren Buffett – hedge funds’ ability to deliver diversified returns, and eke out results in volatile/falling markets, keeps them in play. 

“As expected, overall hedge fund returns lagged public equities while outperforming public debt through to the end of September. However, in terms of risk, the recent downside volatility of the investment grade bond market significantly impacted the relationship between those assets and equities, increasing their correlation. This development has allowed hedge funds to step in as a risk mitigator," Charles McGrath, associate vice president, research insights, at Preqin, said.

In a separate report, figures from Chicago-headquartered said the sector got a Trump boost after the clear-cut result of the 5 November presidential election results. Managers and investors positioned for an active merger and acquisition cycle and more business-friendly policies from the incoming administration. The HFRI Fund Weighted Composite Index rose 2.6 per cent in November, while the HFRI Asset Weighted Composite Index rose 2.1 per cent for the month; these indices rose 10.4 per cent and 8.42 per cent year-to-date, respectively. 

The global sector has around $4.9 trillion of assets as of end-September, according to Preqin, and that’s up 8 per cent from early January. 

Niches
Niche strategy funds, dominated by cryptocurrency-focused sub-strategies, had the highest returns in 2024 to Q3, reaching 16 per cent, Preqin said. Equity-focused funds returned 12 per cent over the same period. Global macro and commodity trading advisor (CTA) funds trailed their peers, but in line with their respective risk and return profiles. Global macro funds rose 7 per cent and CTAs gained 4 per cent in 2024 by Q3.

Launches decline
The number of new hedge fund managers coming to market trended lower over the past eight years, and 2024 will likely end the year at the lowest level since 2000. By Q3 2024, 123 new managers entered the market, compared with 191 in 2000, with a peak of 697 in 2017. Equity strategy funds dominate new hedge fund offerings, but the number of niche funds available has more than doubled over the past five years, from 730 in 2019 to 1,570 in 2024. 

The number of multi-strategy fund launches has grown at an annual rate of 4 per cent since 2017 to 2024 by Q3, with these funds becoming more popular and second only to niche strategies.  

North America-based hedge funds’ assets stood at an estimated $3.95 trillion, and made up about 81 per cent of the global AuM total. Europe was the next largest region with $746.6 billion, or 15 per cent of global assets, while Asia-Pacific held $164.4 billion in hedge fund assets, or just 3 per cent.