Hedge Fund Assets Reach Record $5 Trillion With Most Inflows Since 2007

The last time this many people piled into hedge funds, the only great recession anyone might have been aware of was Larry David’s hairline.

According to a new report published by Hedge Fund Research, the hedge fund industry saw total global assets under management reach a record $5 trillion in the three months ended September 30, the most since Q3 2007. During the quarter, assets rose by $238.4 billion, including $33.7 billion in new allocations, the most since 2007.

Hot Hand

“While risk-on sentiment has dominated recent months, risks have also evolved, with managers participating in acceleration of these trends through year-end but also positioning for sentiment and trend reversals across equities, commodities, currencies and cryptocurrencies,” said HFR president Kenneth Heinz. He noted that institutional investors are likely to increase their allocations to funds that have proven they can balance the risk-on attitude (think AI boom) with planning for defensive reversals (see trade turmoil). To that end, two segments of the hedge fund industry have stood out this year:

• Equity hedge fund managers, the stock traders of the industry who chart markets with cutting-edge sophistication, garnered 7.2% in investment returns and grew their assets by $96.7 billion in the third quarter, HFR said. Their investor net inflows were $18 billion, bringing their assets under management to $1.5 trillion.
• Then there are macro hedge funds, the watchers of all things geopolitics and macroeconomics, who leverage their knowledge of developments to gain an edge trading bonds, commodities, currencies, equities and other assets. Macro strategies’ assets grew by $33.5 billion overall during Q3, with clients pouring in $1.7 billion net, bringing total macro capital to $759 billion. 

Human Touch: While the artificial intelligence boom has been a boon for equity hedge funds, Citadel CEO Ken Griffin doesn’t expect AI to take over jobs in the financial industry any time soon. “With GenAI, there are clearly ways it enhances productivity, but for uncovering alpha, it just falls short,” he told the JPMorgan Robin Hood Investors Conference in New York last week, according to a Bloomberg report.