Total hedge funds assets reached 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 seventh consecutive quarterly increase for the sector. The increase was driven by both hedge fund performance gains and asset managers positioning themselves to face a complex election cycle and volatile geopolitical environment, according to HFRI. Hedge funds focusing on fixed-income, credit, arbitrage and macro strategies saw the most substantial inflows during the quarter.
“Even more so than the prior quarter, managers remained focused on unprecedented geopolitical and election risks and opportunities, with these not only including geopolitical/military conflict but also including ongoing volatile inflation, interest rates and macroeconomic considerations, which have dominated the past two years,” HFRI President Kenneth J. Heinz said in a statement. “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.”
Year-to-date, the HFRI Fund Weighted Composite Index rose by 5.01%, while the HFRI Assets Weighted Composite Index rose by 5.10%.
Hedge funds focused on relative value strategies posted the most robust performance in the second quarter, with the HFRI Relative Value Index gaining 1.36%. HFRI’s Fixed-Income Asset Based Index (up 2.11%), the Fixed-Income Sovereign Index (up 1.76%) and the Fixed-Income Corporate Index (up 1.62%) came out as the strongest categories under the Relative Value umbrella.
The HFRI Equity Hedge Index rose by 0.95% during the quarter. Under that category, the Energy/Basic Materials Index (up 2.82%), the Quantitative Directional Index (up 2.44%) and the Fundamental Growth Index (up 2.21%) performed the best.
The HFRI Event-Driven Index increased by 0.18%. The second quarter's strongest strategies in that category focused on distress and restructuring, with the Distressed/Restructuring Index rising 2.10%. The Credit Arbitrage Index also increased by 1.42%.
The HFRI Macro Index, on the other hand, declined by 0.84%. The loss was driven primarily by the Systematic Diversified Index (down 1.65%), Commodity Index (down 0.92%) and the Multi-Strategy Index (down 0.84%). Year-to-date, however, those same indices posted gains ranging from 3.53% to 7.86%.
In the second quarter, there were approximately 9,151 hedge funds and funds of funds in the market, a slight decline from 9,178 in the first quarter.