Hedge funds grow at fastest rate in history
Assets managed by hedge funds rose by the largest amount ever last quarter due to the AI-driven boom in share prices and investors moving away from private equity and credit funds.
Last quarter, total assets under management grew by $409bn to $5.6tn, with investment performance accounting for much of that rise, according to specialist data provider HFR.
Hedge funds lost money in a volatile March following the outbreak of the Iran war. Since then, they have benefited from a powerful equity price rally led by chip stocks such as Samsung, AMD and SK Hynix.
“I think this is going to be a golden era for hedge funds after a long, long time,” said Shenan Dhanani, co-chief executive at Trium Capital, which manages $5.1bn in assets.
Hedge funds have also received strong investor demand, with the $134bn invested over the last three quarters being the largest inflow over a three-quarter period since 2007, the HFR data showed, writes Costas Mourselas.
This has partly been down to positive returns during a period where the private equity industry has struggled to return capital to investors. Hedge funds often allow redemptions within between one and six months, while private capital vehicles traditionally take between five and seven years to return capital.
“You have a dissatisfaction with some of the private investments, so people are slowly getting money back from PE and they are not necessarily going to put that back in,” said Patrick Ghali, co-founder of Sussex Partners, which advises large investors on hedge fund allocations.
Macro strategies, where hedge funds make bets on key economic indicators such as economic growth and inflation, are the most desirable strategy so far this year according to HFR inflow data.
Institutions such as big pension funds and endowments have looked to insulate their equity portfolios from market swings caused by geopolitical risks, including the potential fallout of the Iran war or a further escalation of the global trade war that US President Donald Trump started last year.
Allocators pulled more than $100bn from the global hedge fund industry in 2022 when many failed to protect their investors from a global crash in equity markets.