Stockholm (HedgeNordic) – At the onset of the fourth quarter, the global hedge fund industry’s assets under management surged past the $4 trillion threshold. This milestone was initially reached in the final quarter of 2021 before the industry experienced a decline in capital during 2022. According to Hedge Fund Research (HFR), investors allocated an estimated $2.3 billion in fresh capital to the hedge fund industry in the third quarter, marking the third consecutive quarter of net asset inflows.
“Total hedge fund capital surpassed the $4 trillion milestone again to conclude 3Q, a milestone initially surpassed in 4Q 2021 before capital declined in 2022, as a volatile combination of macroeconomic and geopolitical risks drove industry performance and investor allocations through a risk off market cycle,” states Kenneth J. Heinz, President of HFR. “Hedge funds have again navigated a powerful shift and negative reversal in risk tolerance and sentiment, as positive correlation between equities and bonds rose sharply throughout 3Q, presenting risks to classic, traditional long-biased strategies, as well as opportunities for funds tactically positioned for these trends.”
“Total hedge fund capital surpassed the $4 trillion milestone again to conclude 3Q, a milestone initially surpassed in 4Q 2021…”
Global hedge funds extended their year-to-date gains through the volatile third quarter, with the HFRI Fund Weighted Composite Index advancing 3.9 percent during the first nine months of the year. The hedge fund industry’s assets under management increased by $53 billion quarter-over-quarter during the three months ending in September. Investors allocated an estimated $2.3 billion in new capital to the hedge fund industry in the third quarter. This growth was fueled by macroeconomic uncertainty, including a sharp increase in interest rates, continued inflationary pressures, economic weakness, and geopolitical uncertainty stemming from military conflicts in Ukraine and the Middle East.
Inflows during the third quarter were concentrated in both mid-sized and the industry’s largest firms. Firms managing between $1 and $5 billion in capital received an estimated $2.9 billion in net investor inflows, while those managing over $5 billion experienced an estimated net asset inflow of $2.2 billion. In the first three quarters of 2023, the largest firms in the industry received an estimated $16.1 billion in net inflows, whereas medium-sized firms received an estimated net of $3.8 billion. In contrast, firms managing less than $1 billion experienced estimated outflows of $2.8 billion in the third quarter and $5.0 billion year-to-date through the end of September.