Global hedge fund capital has surged to a record high of nearly $5 trillion in the third quarter, according to a recent report by Hedge Fund Research (HFR). The sector has also experienced a surge in the number of active hedge funds, reaching a decade-peak of 8,464 by the end of the quarter. This growth reflects a substantial influx of new capital into the hedge fund industry. HFR is a research firm that tracks hedge funds, their returns, and the overall size of the industry. It provides data and analysis on hedge fund performance and trends.
The industry’s expansion coincides with approximately $34 billion in new investor allocations to hedge funds during the third quarter. This represents the highest quarterly net asset inflow since the third quarter of 2007, according to HFR’s report. Total global hedge fund industry capital has risen for eight consecutive quarters, reaching a record $4.98 trillion. The report noted this significant increase in both the number of new hedge funds and the expansion of existing funds.
Major U.S. banks, including JPMorgan Chase, Goldman Sachs, and Bank of America, have reported substantial profits from their prime brokerage businesses. Prime brokerage involves lending cash and securities to hedge funds to facilitate large trades. According to HFR President Kenneth J. Heinz, the hedge fund industry has experienced historic growth and performance in recent months, driven by trends such as increased merger and acquisition activity and growing investments in cryptocurrencies.
This surge in capital inflow brought the total new client inflows for the year to $71 billion, marking the strongest performance for the first three quarters of a year since 2014. Equity hedge funds experienced the highest net inflows during the third quarter, with $18 billion in new flows, followed by relative value hedge funds, which trade the price differences between related financial assets.