Hedge fund assets reached a new high in 2Q24, surpassing $4.3 trillion as managers brace for upcoming elections and geopolitical uncertainties, data has shown.
According to hedge fund research firm HFR, this marks the seventh consecutive quarter of asset growth, driven by performance gains and strategic asset inflows into relative value arbitrage (RVA) and macro strategies.
The HFRI Fund Weighted Composite Index saw a 5.0% increase in 1H24, led by equity hedge and macro strategies. Notably, the HFR Cryptocurrency Index surged by 25.5% in 1H24, though it moderated after a 45.3% gain in 1Q24.
RVA strategies, sensitive to credit and interest rates, saw a $30.3 billion increase in 2Q24, with multi-strategy funds adding $20.1 billion, reaching $712 billion. Macro strategies continued to gain with $2.6 billion in 2Q inflows, totalling $4.4 billion in 1H24, while the HFRI Macro: Systematic Diversified Index led performance at +7.9%.
Event-driven strategies experienced a $7.9 billion outflow in 2Q, bringing total assets to $1.20 trillion. Despite this, the HFRI Event-Driven Index gained 4.2%, with credit arbitrage leading sub-strategy performance at +5.9%.
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Equity hedge strategies saw a decline of $11 billion in 2Q, reducing total assets to $1.24 trillion. The HFRI Equity Hedge Index gained 6.1% in 1H24, with the Quantitative Directional Index leading at +11.7%.
Investors shifted capital to smaller firms, with $3.0 billion in 2Q inflows, while large and mid-sized firms saw outflows of $5.7 billion and $6.7 billion, respectively.
Kenneth J. Heinz, president, HFR, noted the balanced risk sentiment and the positioning of managers for election outcomes and policy changes, emphasizing the attractiveness of these conditions to institutional investors seeking to navigate volatility and risk.
“The second quarter results reflect these increasing risks and a more balanced risk sentiment than 1Q, with managers navigating these thematic micro-cycles driven by shifting expectations for election results, policy changes, trade impacts, interest rate/inflation expectations and tension between extended equity valuations and the potential for continued growth.
Investors and institutions are likely to increase commitments to managers positioned for these historic uncertain conditions and which have successfully navigated these cycles over the past year, with institutional investors seeking both access to these opportunities while protecting portfolios from volatility and risk.”
