Global Hedge Fund Industry | Growth, Trends, and Forecasts (2023 - 2028)

Hedge Fund Market Analysis

The global hedge fund industry is currently facing headwinds from fee pressure, increased redemptions, and liquidations. The situation has further worsened due to the decreasing number of launches of new funds, as investors around the world are more inclined toward defensive strategies. Despite these tough times, the industry witnessed double-digit annualized return in 2019 for the first time in the past six years. 

The United States accounts for three-quarters of the Assets Under Management (AuM) across the world, in this industry. Despite the increase in hedge fund activity in other regions globally, alongside the United States, the country accounts for 3,405 of the 5,523 institutional investors active in hedge funds and 3,319 of the 5,383 active hedge fund managers. 

Given the fee pressure, fund managers in some places have given up the traditional 2-20 fee structure for 0% management fee and 30% performance fee.

Fund managers are also increasingly applying artificial intelligence and machine learning (AIML) techniques to improve operational efficiencies and boost returns. There are 150 active crypto hedge funds collectively managing USD 1 billion AuM (excluding crypto index funds and crypto venture capital funds). Over 60% of these funds have less than USD 10 million in AuM, with fewer than 10% managing over USD 50 million.

Hedge Fund Industry Segments

An understanding of the present status of the global hedge fund industry to deep-dive into the regulatory landscape, along with detailed market segmentation, product types, current market trends, changes in market dynamics, and growth opportunities. In-depth analysis of the market size and forecast for the various segments.

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Hedge Fund Market Trends

This section covers the major market trends shaping the Hedge Fund Market according to our research experts:

Asset Flow Trends into Hedge Funds

Asset inflow has been consistently negative over the years. In the last decade, the global hedge fund industry initially saw inflows, as investors put money back to work following the global financial crisis. However, three out of the last four years saw overall outflows amounting to approximately USD 140 billion. Meanwhile, a massive rally for long-only assets made generating alpha difficult for hedge fund managers. In absolute terms, performance in the 2010s significantly lagged compared to the 2000s.

For 2019, investors withdrew a net amount of USD 82 billion from hedge funds in the year till November. This marked the worst year for redemptions since USD 110 billion was withdrawn in 2016. Shifting investor sentiment further made the market more challenging for new launches. Mere 529 hedge funds were launched in 2019 – roughly half the number witnessed in 2018 (1,169) – marking the seventh consecutive year of decline. Liquidations outpaced new funds entering the market, shrinking the number of active funds in the industry to 16,256.

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