With the global hedge fund industry now standing at a staggering $4.32 trillion in assets, a complex and powerful ecosystem thrives far from the public markets, where titans like multi-strategy and long/short equity funds command trillions, nimble quant managers deploy half a trillion, and strategies from volatile crypto plays to steady event-driven bets all compete for alpha in a constantly evolving landscape of risk and reward.
Key Takeaways
- Global hedge fund industry AUM reached $4.32 trillion as of Q2 2023
- US hedge fund AUM stood at $2.1 trillion in 2022
- Hedge fund AUM grew by 12.5% year-over-year to $3.8 trillion in 2021
- Hedge fund industry average annual return 2022 was 4.2%
- HFRI Fund Weighted Composite Index returned -4.1% in 2022
- Equity Hedge Index up 8.5% in 2023 YTD
- Number of hedge funds worldwide 11,000 as of 2023
- US-based hedge funds total 5,200 in 2023
- New hedge fund launches 450 in 2022
- Average management fee 1.5% in 2023
- Performance fee average 16.4% in 2023
- Hurdle rate used by 35% of funds in 2022
- Long/short equity strategies 30% of industry AUM 2023
- Multi-strategy 25% allocation in 2023
- Global macro 15% of AUM 2023
The global hedge fund industry has grown to $4.32 trillion in assets under management.
Assets Under Management
- Global hedge fund industry AUM reached $4.32 trillion as of Q2 2023
- US hedge fund AUM stood at $2.1 trillion in 2022
- Hedge fund AUM grew by 12.5% year-over-year to $3.8 trillion in 2021
- North America accounts for 68% of global hedge fund AUM at $2.95 trillion in 2023
- Multi-strategy funds hold $1.2 trillion in AUM as of 2023
- European hedge fund AUM totaled $850 billion in mid-2023
- Asia-Pacific hedge fund AUM reached $300 billion in 2022
- Credit hedge funds manage $450 billion in AUM globally in 2023
- Equity long/short strategies AUM at $900 billion end-2022
- Event-driven hedge funds AUM grew to $250 billion in 2023
- Macro hedge funds AUM stands at $600 billion in Q3 2023
- Quant hedge funds AUM hit $500 billion in 2023
- Emerging markets hedge fund AUM at $150 billion in 2022
- CTAs manage $400 billion AUM globally in 2023
- Fixed income arbitrage AUM $100 billion in 2023
- Global macro AUM increased 15% to $650 billion in 2022
- US equity hedge funds AUM $1.1 trillion in 2023
- Pension funds allocate 10% of AUM to hedge funds totaling $500bn
- Family offices hold $200 billion in hedge fund AUM 2023
- UCITS hedge funds AUM $400 billion in Europe 2023
- Crypto hedge funds AUM $15 billion in 2023
- Hedge fund AUM-to-GDP ratio 5.2% globally in 2022
- Largest 100 hedge funds control 45% of industry AUM at $1.9tn 2023
- AUM inflows $120 billion in H1 2023
- Offshore hedge fund AUM $3.2 trillion 2023
- Retail investor AUM in hedge funds $50 billion 2022
- Volatility-targeted funds AUM $80 billion 2023
- Distressed securities AUM $120 billion 2023
- Merger arbitrage AUM $70 billion end-2022
Assets Under Management Interpretation
While collectively wielding the financial heft of a major global economy, the hedge fund industry’s staggering $4.3 trillion in assets is precariously concentrated, with a mere hundred firms effectively holding the fate of nearly half the capital hostage to their next big bet.
Fees and Structures
- Average management fee 1.5% in 2023
- Performance fee average 16.4% in 2023
- Hurdle rate used by 35% of funds in 2022
- High-water mark prevalent in 92% of funds 2023
- 2-and-20 fee structure in 25% of funds 2023
- Incentive fee average 18% for top quartile 2022
- Management fee decline to 1.4% for new funds 2023
- Crystal barrier in 15% of liquid funds 2023
- Equalization deposit used by 40% managers 2022
- Performance fee clawback 28% of funds 2023
- Soft lockup average 30 days in 2023
- Notice period average 45 days for redemptions 2023
- Gate provision 65% of funds 2022
- Side pocket usage 12% of AUM in 2023
- Hurdle rate 5-7% in 20% multi-strat funds 2023
- Management fee tiering in 55% large funds 2023
- Fulcrum fees in 8% of funds 2022
- Waterfall frequency quarterly in 70% 2023
- Expense ratio average 0.8% beyond fees 2023
- Placement agent fees 1-2% for 30% raises 2023
- Prime broker rebates 10bps average 2022
- Admin fees 5-10bps on AUM 2023
- Auditor fees $50k-$200k per fund 2023
- Legal setup costs $250k average for new fund 2023
- Redemption fee 1-2% short-term in 25% funds 2023
- Subscription fee 0.5% average 2022
- Management fee for FoFs 0.5-1% 2023
- Performance fee cap 20% in 85% agreements 2023
Fees and Structures Interpretation
Hedge funds have perfected the art of charging you handsomely for the privilege of watching them erect a complex labyrinth of fees, hurdles, and locks, all while diligently ensuring the house always wins even when the clients don't.
Number of Hedge Funds and Managers
- Number of hedge funds worldwide 11,000 as of 2023
- US-based hedge funds total 5,200 in 2023
- New hedge fund launches 450 in 2022
- Hedge fund closures 600 in 2022
- Number of hedge fund managers 3,800 globally 2023
- Largest manager Citadel manages 50+ funds
- Europe hosts 2,100 hedge funds 2023
- Asia has 1,200 hedge funds in 2022
- Emerging manager funds 1,500 worldwide 2023
- Multi-family office managed funds 800 in 2023
- UCITS compliant funds 1,800 in 2023
- Crypto-focused hedge funds 300 in 2023
- Female-led hedge funds 250 globally 2023
- Quant-only managers 450 in 2022
- Single-strategy funds 7,500 out of total 2023
- Fund of hedge funds number 1,200 in 2023
- Cayman Islands domiciled funds 8,000 2023
- Average fund age 8.2 years in 2023
- Managers with AUM over $5bn: 250 in 2023
- New launches in US 200 in H1 2023
- Liquidation rate 5.5% of funds in 2022
- Asia new launches 100 in 2022
- Diversity managers 400 in 2023
- Platform-managed funds 900 in 2023
- Retail-accessible funds 500 in US 2023
- ESG-focused hedge funds 350 in 2023
- Average number of employees per manager 45 in 2023
- Top 50 managers oversee 2,500 funds 2023
Number of Hedge Funds and Managers Interpretation
Despite an industry-wide game of musical chairs—where 600 funds closed as 450 new ones launched last year—the hedge fund world remains a sprawling, tax-optimized empire of 11,000 outposts, largely run by a surprisingly small club of 3,800 managers who are overwhelmingly still male, decidedly not crypto-focused, and most likely registered in the Cayman Islands.
Performance and Returns
- Hedge fund industry average annual return 2022 was 4.2%
- HFRI Fund Weighted Composite Index returned -4.1% in 2022
- Equity Hedge Index up 8.5% in 2023 YTD
- Global macro strategies returned 9.2% in 2022
- Credit strategies averaged 5.1% return in 2023 H1
- Long/short equity returned -2.3% in 2022
- Event-driven index up 3.8% YTD 2023
- CTA/managed futures returned 12.4% in 2022
- Multi-strategy funds averaged 6.7% in 2023
- Quant multi-strat returned 11.2% in 2022
- Emerging markets hedge funds -5.6% in 2022
- Fixed income arb 4.9% return 2023 H1
- Sharpe ratio for hedge funds averaged 0.85 in 2022
- Top decile hedge funds returned 15.2% in 2022
- Volatility of hedge fund returns 8.2% annualized 2023
- Correlation to S&P 500 0.45 for hedge funds 2022
- Sortino ratio 1.12 for equity hedge 2023
- Downside deviation 5.1% for macro funds 2022
- Maximum drawdown -12.4% for industry in 2022
- Alpha generation 2.3% annualized over 5 years to 2023
- Beta to equities 0.32 for hedge funds 2023
- Calmar ratio 0.65 for top strategies 2022
- 10-year annualized return 7.8% for HFRI Composite
- Relative performance vs equities +3.2% in down markets 2022
- Sterling ratio 0.92 for credit funds 2023
- Information ratio 0.41 annualized 2022
- Multi-strat Sharpe 1.05 in 2023 H1
- Equity market neutral return 4.1% 2022
- Hedge fund of funds returned 1.8% in 2022
- CTAs up 15.6% in Q4 2022
- Distressed debt 7.2% return 2023
Performance and Returns Interpretation
The hedge fund industry’s 2022 story is a paradox where the average fund politely returned 4.2% while its most famous index embarrassingly lost 4.1%, proving that even experts can't agree on whether the glass is half full of alpha or just expensive, diluted water.
Strategies and Allocation
- Long/short equity strategies 30% of industry AUM 2023
- Multi-strategy 25% allocation in 2023
- Global macro 15% of AUM 2023
- Credit strategies 12% share 2023
- Event-driven 10% of total AUM 2023
- Relative value 8% allocation 2023
- CTA/managed futures 7% in 2023
- Equity market neutral 5% AUM 2023
- Emerging markets 4% dedicated 2023
- Fixed income strategies 6% total 2023
- Quant/systematic 20% growing share 2023
- Distressed securities 2% within event-driven 2023
- Merger arbitrage 1.5% AUM 2023
- Volatility trading 3% allocation 2023
- Crypto strategies 1% emerging 2023
- ESG integration 15% of funds 2023
- Long-only like 5% in equity hedge 2023
- Short bias rare at 0.5% 2023
- Sector focus tech 12% of equity L/S 2023
- Healthcare allocation 8% in L/S equity 2023
- Commodities trading 4% macro 2023
- Currency strategies 3% in macro 2023
- Convertible arb 2% rel value 2023
- Statistical arb 5% quant 2023
- Trend following 70% of CTA AUM 2023
- Multi-asset CTAs 20% 2023
- High-frequency trading 10% quant 2023
- Fundamental long/short 40% equity hedge 2023
- Dedicated short bias 0.2% 2023
Strategies and Allocation Interpretation
Hedge funds have become a sprawling carnival of specialization, with the main tent still belonging to the long/short equity ringmasters, while the quantitative clowns are rapidly taking over more of the show, all while the crypto and ESG sideshows vie for a permanent spot on the midway.
Sources & References
- Reference 1PREQINpreqin.comVisit source
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- Reference 3BARCLAYHEDGEbarclayhedge.comVisit source
- Reference 4EUREKAHEDGEeurekahedge.comVisit source
- Reference 5WITHINTELLIGENCEwithintelligence.comVisit source
- Reference 6THINKINGAHEADINSTITUTEthinkingaheadinstitute.orgVisit source
- Reference 7INSTITUTIONALINVESTORinstitutionalinvestor.comVisit source