Hedge fund launch volume rose 70% quarter-over-quarter in the first three months of 2024 to 146. According to the June report from Chicago-based research firm HFR, this figure was the highest since the first quarter of 2022. At the same time, the number of hedge fund liquidations remained roughly on par with the fourth quarter of 2023, with 106 closed funds.
Equity hedge funds led launches in the first quarter, at 75. Within that category, tech-focused large cap equity strategies heavily dominated.
In the first quarter, hedge funds with an equity hedge strategy represented 29.07% of the industry’s assets. They were followed by hedge funds with event-driven strategies (28.07%), relative value strategies (26.24%) and macro strategies (16.63%).
“Geopolitical risk and inflation are likely to define 2024, accelerating trends from 2023 with hedge fund performance and growth trends reflecting expanding interest from institutional investors looking for specialized exposure to these trends with important capital preservation,” HFR President Kenneth J. Heinz said in a statement. “Managers continued to position for ongoing geopolitical risk driven by ongoing European elections and upcoming U.S. elections, anticipating significant policy shifts and trade impacts, though these risks also include ongoing and potential new military conflicts, with these risks likely to increase throughout 2024. The powerful combination of strong performance, specialized exposures, and capital preservation are likely to drive industry growth throughout 2024.”
In terms of overall net flows, hedge funds picked up inflows of $16.6 billion in the quarter after seeing net outflows of $24.5 billion during the previous quarter. Hedge funds have posted inflows in four of the last five quarters. The $16.6 billion figure is the largest since the first quarter of 2022, when the inflow figure reached $19.8 billion.
The HFRI Fund-Weighted Composite Index rose 1.41% in May and 5.18% year-to-date in 2024. The HFRI Asset-Weighted Composite Index rose by 0.16% and 5.68% during those periods, respectively.
Among the firm’s single-manager strategy indices, the Equity Hedge Index rose 2.39% in May and 5.97% year-to-date. Under that category, the Energy/Basic Materials Index (up 4.07%), Technology Index (up 3.2%) and Quantitative Directional Index (up 3.14%) performed the best in May.
The HFRI Event-Drive Index also rose by 1.56% in May. Year-to-date, it is up 2.76%. In that category, the Distressed/Restructuring Index (up 1.88%) and the Multi-Strategy Index (up 1.82%) performed the best during the month.
The HFRI Relative Value Index rose 0.7% in May and 3.38% year-to-date. The category was led by the Fixed-Income Backed Index (up 1.07%) and the Fixed-Income Corporate Index (up 1.01%).
The HFRI Macro Index fell by 0.30% during May, in spite of rising by 6.89%, the most year to date. During May, the Active Trading Index, the Discretional Thematic Index and the Multi-Strategy Index stayed in the positive category, although with increases under 1.0%. However, the Commodity Index, the Currency Index and the Systematic Diversified Index declined.