LONDON, 11 December 2024 – Preqin, the global leader in alternative assets data, tools, and insights, today published its Preqin 2025 Global Report: Hedge Funds. The report shows that hedge funds demonstrated value in investor portfolios as diversifiers and risk mitigators, while offering returns in 2024.

AUM growth driven largely by hedge funds’ performance

Global equity and bond markets were relatively volatile in 2024 and within this context, hedge funds proved to be steady. Preqin’s All Hedge Fund Index returned 10% in 2024 to Q3, or 14% at a compound annualized growth rate (CAGR). $25.5bn in hedge fund inflows in Q3 2024 resulted in $19.2bn in net subscriptions through the first nine months of the year. This single quarter, however, should for now be considered an outlier given net outflows have persisted for most of the last decade.

Assets under management (AUM) for hedge funds globally stood at $4.9tn by Q3 2024, an 8% increase from the $4.5tn at the start of the year. The 12% 12-month growth to Q3 2024 was notably above average historical figures. As an asset class, hedge funds have mostly seen net outflows over the long-term, meaning performance was the key driver behind AUM growth.

Overall returns of 10% for 2024 to Q3 lagged global public equities at 19% (MSCI World Index), but outperformed public debt at 4% (Bloomberg Global Aggregate index). Within overall returns, each hedge fund strategy showed itself capable of mitigating – to varying degrees – the volatility experienced in equity and bond markets in 2024 when added to a larger public market portfolio. Niche strategy funds, dominated by cryptocurrency-focused sub-strategies, had the highest returns in 2024 to Q3, reaching 16%. Equity-focused funds returned 12% over the same period, while global macro and commodity trading advisor (CTA) funds trailed their peers, but in line with their respective risk and return profiles. Global macro funds were up 7% and CTAs gained 4% in 2024 by Q3.

Manager launches at record low, but niche and multi-strategy fund launches rise

The number of new hedge fund managers coming to market trended lower over the past eight years, and 2024 will likely end the year at the lowest level since 2000. By Q3 2024, 123 new managers entered the market, compared to 191 in 2000, with a peak of 697 in 2017. Equity strategy funds dominate new hedge fund offerings, but the number of niche funds available has more than doubled over the past five years, from 730 in 2019 to 1,570 in 2024. Adding to this, the number of multi-strategy fund launches grew at an annual rate of 4% since 2017 to 2024 by Q3, with these funds becoming more popular and second only to niche strategies.

Charles McGrath, Associate Vice President, Research Insights, at Preqin, says, “As expected, overall hedge fund returns lagged public equities while outperforming public debt through to the end of September. However, in terms of risk, the recent downside volatility of the investment grade bond market significantly impacted the relationship between those assets and equities, increasing their correlation. This development has allowed hedge funds to step in as a risk mitigator.”

Additional key findings from the Preqin Global Report 2025: Hedge Funds include:

• Institutional investors’ allocations: The largest segment, public pension plans, saw average hedge fund allocations fall towards 7% of total assets over the past five years, from 8% historically. This marks a large amount of capital no longer focused on hedge funds, with the US public pension system alone worth $8tn.

• Hedge fund AUM by global region: North America-based hedge funds’ assets stood at an estimated $3.95tn and made up about 81% of global AUM by Q3 2024. North America-based hedge funds’ share of AUM points towards the recent trend of asset consolidation by taking greater share from other global regions. Europe was the next largest region with $746.6bn, or 15% of global assets, while APAC held $164.4bn in hedge fund assets, 3% of total AUM.

• Hedge fund AUM by strategy: At the strategy-level, global macro funds remain the largest category by AUM with an estimated $1.41tn in net assets by Q3 2024. However, global macro funds’ 5% increase in AUM by this same period was below hedge funds’ overall growth. It was also below relative value and equity funds, which were up 13% and 10% over the period, respectively.

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