Hedge funds now manage a record of nearly $5 trillion, HFR said
Global hedge fund capital rose to a record of nearly $5 trillion in the third quarter and the number of hedge funds was at its peak in a decade, reflecting the influx of new funds into the sector, according to a Hedge Fund Research (HFR) report.
Global hedge funds numbered 8,464 at the end of the third quarter, said research firm HFR, which tracks hedge funds, their profits and the size of their industry.
The growth coincided with nearly $34 billion in new investor money allocated to hedge funds in the third quarter, which was the highest quarterly net asset inflow since the third quarter of 2007, the HFR report said.
The global hedge fund industry’s total capital increased for the eighth consecutive quarter in the third quarter to reach a record $4.98 trillion, HFR said.
In the last quarter, the largest US banks led by JPMorgan Chase JPM, Goldman Sachs GS and Bank of America BAC posted huge profits from the booming prime brokerage business, which involves lending cash and securities to hedge funds to help execute big trades.
“The hedge fund industry has experienced historic growth and performance in recent months,” HFR president Kenneth J. Heinz said in the note, adding the growth was driven by a combination of “strong trends” including mergers and acquisitions and increased cryptocurrency investments.
Investors such as pension funds, family offices and sovereign wealth funds allocate a portion of their portfolios to hedge funds.
This brings total new client inflows for the year to $71 billion, the strongest year so far for inflows in the first three quarters since 2014, HFR said.
Equity hedge funds generated the highest net amount in the third quarter, with new fund flows of $18 billion, followed by relative value hedge funds that trade the price of one financial asset against another, the report said.
Net inflows are the investment money of the allocator and these figures do not include the performance value of leveraged trading assets which can rise and fall depending on market performance.
Source: Reuters
