While massive names like Citadel command the headlines, the real story of the hedge fund industry is found in the explosive growth and diversification captured by these figures: from its staggering $4.3 trillion in global assets to the nuanced strategies quietly generating alpha, the landscape has evolved far beyond its old stereotypes.
Key Takeaways
- Global hedge fund industry assets under management (AUM) reached $4.3 trillion as of Q2 2023, marking a 6.5% increase year-over-year.
- U.S. hedge funds accounted for 68% of global AUM, totaling approximately $2.92 trillion in mid-2023.
- Multi-strategy hedge funds held $1.1 trillion in AUM, representing 25% of the industry's total as of 2023.
- Average annual return for hedge funds was 7.8% in 2022.
- HFRI Fund Weighted Composite Index returned 5.2% in 2023 YTD.
- Top decile hedge funds averaged 15.4% returns in 2022.
- Number of hedge funds worldwide reached 11,000 in 2023.
- U.S.-domiciled hedge funds totaled 5,200 in 2023.
- New hedge fund launches: 450 in 2022.
- Equity long/short 35% of strategies, multi-strat 25%, macro 15%, event-driven 12%, CTA 8%, credit 5%.
- Long/short equity funds represent 35% of industry AUM.
- Multi-strategy allocation 28% of new launches 2023.
- Average management fee 1.5%, performance fee 16.5% in 2023.
- Hurdle rate used by 40% of funds, average 5%.
- High-water mark standard in 95% of hedge funds.
The $4.3 trillion hedge fund industry is growing and concentrated in the United States.
Assets Under Management
- Global hedge fund industry assets under management (AUM) reached $4.3 trillion as of Q2 2023, marking a 6.5% increase year-over-year.
- U.S. hedge funds accounted for 68% of global AUM, totaling approximately $2.92 trillion in mid-2023.
- Multi-strategy hedge funds held $1.1 trillion in AUM, representing 25% of the industry's total as of 2023.
- Hedge fund AUM in Asia-Pacific grew by 12% to $450 billion in 2022.
- Credit hedge funds managed $300 billion AUM globally at end-2022, up 8% from prior year.
- European hedge fund AUM stood at $800 billion in Q1 2023, with 4% YoY growth.
- Quant hedge funds AUM exceeded $500 billion worldwide in 2023.
- Emerging markets hedge funds AUM hit $150 billion in 2022, rising 10% annually.
- Macro hedge funds managed $450 billion AUM as of 2023.
- Long/short equity hedge funds held $1.2 trillion AUM globally in Q3 2023.
- Event-driven hedge funds AUM reached $250 billion in 2023.
- CTAs (Commodity Trading Advisors) managed $400 billion AUM end-2022.
- Hedge fund AUM inflows totaled $120 billion in H1 2023.
- Largest hedge fund, Citadel, managed $62 billion AUM in 2023.
- Bridgewater Associates AUM at $100 billion as of 2023.
- Millennium Management AUM surpassed $60 billion in 2023.
- D.E. Shaw AUM around $55 billion end-2022.
- Two Sigma AUM at $70 billion in 2023.
- Renaissance Technologies AUM $165 billion as of 2023.
- AQR Capital Management AUM $226 billion in 2023.
- Global hedge fund AUM projected to reach $5 trillion by 2027.
- Pension funds allocated 10% of portfolios to hedge funds, contributing $430 billion AUM.
- Endowments held $200 billion in hedge fund AUM in 2023.
- Family offices invested $150 billion in hedge funds end-2022.
- Hedge fund AUM concentration: top 100 managers hold 40% of total AUM.
- UCITS hedge funds AUM at $350 billion in Europe 2023.
- Crypto hedge funds AUM grew to $15 billion in 2023.
- ESG hedge funds AUM reached $50 billion globally 2023.
- Retail investor AUM in hedge fund-like products hit $100 billion.
- Hedge fund AUM per capita in U.S. averaged $9,000 in 2023.
Assets Under Management Interpretation
Despite the dizzying array of strategies and regional tales of growth, the hedge fund world tells a rather conventional story: an enormous pile of money, concentrated in the hands of a few U.S. giants, is chasing slightly larger piles of money with predictably mixed results.
Fees, Expenses, and Compensation
- Average management fee 1.5%, performance fee 16.5% in 2023.
- Hurdle rate used by 40% of funds, average 5%.
- High-water mark standard in 95% of hedge funds.
- Average expense ratio 2.2% excluding performance fees.
- Top quartile managers charge 1.8%/18% fee structure.
- Emerging managers average 1.4%/15% fees.
- Multi-strat funds fees 1.7%/17.2% average.
- FoFs charge additional 1%/10% on top of underlying.
- Fee pressure led to 20% of funds lowering mgmt fee since 2020.
- Performance fee waivers in 15% of liquidations 2022.
- Average hedge fund manager compensation $1.2 million in 2022.
- Top 25 managers total comp $25 billion in 2022.
- Citadel CEO Ken Griffin earned $4.1 billion in 2022.
- Millennium founder Izzy Englander $3.8 billion comp 2022.
- Average portfolio manager salary $450,000 base + bonus.
- Quant researcher average total comp $800,000 in NY 2023.
- Trader comp median $350,000 in hedge funds 2023.
- Operational staff average salary $150,000 annually.
- 20% carry for founding partners common.
- Redemption fees average 1-3 months notice, 25% gate.
- Prime brokerage fees 10-20 bps on gross exposure.
- Admin/custody fees 5-10 bps of AUM.
- Audit fees average $100,000 per fund annually.
- Compliance costs rose 15% to $500k average firm 2023.
- Insider trading clawbacks in 5% of fee disputes.
Fees, Expenses, and Compensation Interpretation
In an industry where the average fund charges "1.5 and 16.5," it's clear the real performance hurdle is justifying why so much of the profit stays with the manager before it ever reaches the investor.
Fund Counts and Managers
- Number of hedge funds worldwide reached 11,000 in 2023.
- U.S.-domiciled hedge funds totaled 5,200 in 2023.
- New hedge fund launches: 450 in 2022.
- Hedge fund liquidations: 300 in 2023.
- Number of hedge fund managers: 3,800 globally in 2023.
- Largest manager Citadel employs 2,900 staff in 2023.
- Average hedge fund firm size: 25 employees in 2022.
- Emerging managers (under $500M AUM): 2,500 funds.
- Multi-family office hedge funds: 1,200 in Europe 2023.
- Asia-based hedge fund managers: 1,100 in 2023.
- Cayman Islands domiciled funds: 7,500 in 2023.
- Delaware-based hedge funds: 2,000.
- Prime broker relationships: average 3 per hedge fund manager.
- Hedge fund platforms host 1,500 satellite funds.
- Female-led hedge funds: 250 globally in 2023.
- Average fund age: 8.5 years in 2023.
- Single-manager funds: 8,000 vs. 3,000 multi-manager.
- U.S. SEC-registered advisers: 4,500 for hedge funds.
- FoF (Funds of Funds) managers: 600 in 2023.
- Crypto hedge fund managers: 400 worldwide.
- Quant-driven managers: 1,200 in 2023.
- Boutique managers (under 10 employees): 2,000.
- Institutional-grade managers: 1,500 managing over $1B.
- Hedge fund manager churn rate: 12% annually.
- New manager AUM median $150 million at launch 2023.
- Top 50 managers control 35% of industry funds.
- Offshore fund counts: 9,000 in 2023.
- Long/short equity managers: 2,500 firms.
- Global macro managers: 800 in 2023.
Fund Counts and Managers Interpretation
With over 11,000 funds globally yet 3,800 managers, the industry reveals itself as a concentrated hive where a few queen bees like Citadel rule massive colonies, while thousands of tiny, often short-lived boutiques swarm for survival, proving that in hedge funds, it's less a level playing field and more a pyramid scheme of assets and influence.
Investment Strategies
- Equity long/short 35% of strategies, multi-strat 25%, macro 15%, event-driven 12%, CTA 8%, credit 5%.
- Long/short equity funds represent 35% of industry AUM.
- Multi-strategy allocation 28% of new launches 2023.
- Global macro strategies used by 12% of funds.
- Event-driven strategies comprise 11% of AUM.
- CTA/managed futures 9% of total strategies.
- Relative value arbitrage 7% of hedge fund universe.
- Credit strategies 6% of AUM, focused on distressed debt.
- Emerging markets strategies 4% of industry.
- Quant/systematic strategies 22% of AUM growth.
- Market neutral long/short 5% allocation.
- Merger arbitrage within event-driven: 40% sub-strategy.
- Trend-following CTAs 60% of managed futures.
- Fixed income arbitrage 2% of strategies.
- Equity special situations 15% of long/short.
- Volatility trading strategies 3% of AUM.
- Crypto/multi-asset strategies emerging at 1%.
- ESG-integrated strategies 8% of new funds 2023.
- High-frequency trading quant subset 10% of quants.
- Statistical arbitrage 20% of relative value.
- Convertible arbitrage 25% of relative value AUM.
- Distressed securities 30% of event-driven.
- Discretionary macro 70% vs systematic 30%.
- Sector-focused long/short: tech 25%, healthcare 20%.
- Tail-risk hedging strategies 2% AUM.
- Peer-to-peer lending hedge-like 1%.
- Pipeline/energy infrastructure strategies 1%.
- Average leverage for equity long/short 1.5:1.
- Gross exposure average 180% for long/short funds.
- Short-only funds <1% of strategies.
Investment Strategies Interpretation
The hedge fund industry is a meticulously engineered, high-leverage mosaic where long-short equity is the dominant brushstroke, multi-strat is the trendy new color, and a thousand intricate, risky sub-strategies jostle for a sliver of capital, all while quants quietly siphon the growth.
Performance Statistics
- Average annual return for hedge funds was 7.8% in 2022.
- HFRI Fund Weighted Composite Index returned 5.2% in 2023 YTD.
- Top decile hedge funds averaged 15.4% returns in 2022.
- Equity long/short strategy returned 8.1% in 2023.
- Global macro hedge funds averaged 6.7% return in 2022.
- Credit hedge funds posted 4.9% returns in H1 2023.
- Event-driven strategy returned 7.2% in 2023.
- Managed futures (CTA) averaged 9.1% in 2022 amid volatility.
- Multi-strategy funds returned 10.3% in 2023.
- Quant/multi-strat funds averaged 12.5% returns in 2022.
- Citadel's Wellington fund returned 15.1% in 2023.
- Millennium Management averaged 10% net returns in 2023.
- D.E. Shaw Composite returned 11.2% in 2022.
- Renaissance Medallion Fund historically averaged 66% gross annual returns since 1988.
- Bridgewater Pure Alpha returned 7.8% in 2023.
- AQR Style Premia returned 9.4% in 2022.
- Hedge funds outperformed S&P 500 by 2.1% in drawdowns 2022.
- Sharpe ratio for hedge funds averaged 0.85 in 2023.
- Sortino ratio for top hedge funds 1.45 in 2022.
- Hedge fund volatility averaged 8.2% annualized in 2023.
- 65% of hedge funds beat their benchmarks in H1 2023.
- Worst-performing hedge fund lost 25% in 2022.
- Hedge funds' max drawdown averaged -4.5% in 2023.
- Correlation to equities dropped to 0.45 for hedge funds in 2022.
- Alpha generation averaged 3.2% for hedge funds vs. 60/40 portfolio in 2023.
- Multi-strat funds' information ratio 1.12 in 2022.
- Long volatility hedge funds returned 18% in 2022.
- Short bias funds averaged -5.2% in bull market 2023.
- Hedge fund industry 10-year annualized return 6.1% to 2023.
Performance Statistics Interpretation
The hedge fund industry presents a paradox where, for most investors, the collective "wisdom" of paying 2-and-20 has yielded a rather mundane 6.1% over the past decade, yet a select few firms prove it's possible to consistently excel—provided you're not the one holding the bill for the average fund's underwhelming performance.
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