Total hedge fund assets hit a new record of $4.31 trillion in the second quarter of 2024, reports Chicago-based research firm HFRI.
The $11 billion jump in assets in the second quarter marked the sector's seventh straight quarter of growth. The increase was driven by both hedge fund performance gains and asset managers' positioning to weather a complex election cycle and volatile geopolitical environment, according to HFRI. Hedge funds focused on fixed income, credit, arbitrage and macro strategies saw the most significant inflows during the quarter.
“Even more than last quarter, managers remained focused on unprecedented geopolitical and electoral risks and opportunities, with these not only including geopolitical/military conflict, but also continued volatile inflation, interest rates and macroeconomic considerations, which have dominated the last two years. ,” HFRI President Kenneth J. Heinz said in a statement. “Second quarter results reflect these heightened risks and a more balanced sense of risk than the first quarter, with managers navigating these thematic microcycles driven by changing expectations for election results, policy changes, trade impacts, rates of interest/inflation expectations and the tension between extended capital. ratings and the potential for continued growth.”
Year to date, the HFRI Fund Weighted Composite Index is up 5.01%, while the HFRI Asset Weighted Composite Index is up 5.10%.
Hedge funds focused on relative value strategies posted the strongest performance in the second quarter, with the HFRI Relative Value Index gaining 1.36%. HFRI Fixed Income-based Index (up 2.11%), Sovereign Fixed Income Index (up 1.76%) and Corporate Fixed Income Index (up 1.62%) emerged as the top performers stronger under the umbrella of relative value.
The HFRI Capital Hedging Index was up 0.95% during the quarter. In this category, the Energy/Basic Materials Index (up 2.82%), the Quantitative Direction Index (up 2.44%) and the Basic Growth Index (up 2.21%) performed best.
The HFRI event-driven index rose 0.18%. The second quarter's strongest strategies in that category focused on distress and restructuring, up 2.10%. The Credit Arbitrage Index also rose by 1.42%.
The HFRI macro index, on the other hand, fell by 0.84%. The loss was mainly caused by the Systematically Diversified Index (down 1.65%), the Commodity Index (down 0.92%) and the Multi-Strategy Index (down 0.84%). However, year-to-date, the same indices posted gains ranging from 3.53% to 7.86%.
In the second quarter, there were about 9,151 hedge funds and funds of funds on the market, down slightly from 9,178 in the first quarter.