Hedge Fund Data
Hedge fund industry performance deep dive – Full year 2024
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In summary…
- Hedge funds had their strongest year since the post-financial crisis bounce-back in 2009 – up 11.3%, outperforming bonds, -1.7%, but underperforming equities, +14.5%
- Multi-strategy was the strongest performing master strategy during the year, +13.6%, after being the 5th best performing master strategy in 2023
- Arbitrage was the lowest performing strategy, delivering +5.9%, after being the second-lowest performing strategy in 2023
- Industry AUM grew. This growth was largely driven by P&L; all strategies had negative net flows except multi-strategy and arbitrage
- Alt UCITS underperformed hedge funds in all strategies
Contents:
Strategy chart packs
Hedge fund industry performance review
Asset growth
Hedge fund assets – as measured by those funds reporting to Aurum’s Hedge Fund Data Engine – have grown by $192.2bn since the end of 2023 to stand at $3.1tn. This was driven by net positive performance (+$283.6bn) and partially offset by outflows (-$91.4bn). All but one of the eight hedge fund master strategies saw net growth in AUM, led by equity long/short and multi-strategy; long biased was the only master strategy which saw AUM shrink during the period. Equity long/short growth in AUM was exclusively driven by significant net positive P&L, which was offset by significant net investor outflows. Multi-strategy growth was all driven by positive P&L, there were no notable net flows. The only strategy to receive positive net flows was arbitrage, but these were small.
About Aurum
Aurum is an investment management firm focused on selecting hedge funds and managing fund of hedge fund portfolios for some of the world’s most sophisticated investors. Aurum also offers a range of single manager feeder funds.
Aurum’s portfolios are designed to grow and protect clients’ capital, while providing consistent uncorrelated returns. With 30 years of hedge fund investment experience, Aurum’s objective is to lower the barriers to entry enabling investors to access the world’s best hedge funds.
Aurum conducts extensive research and analysis on hedge funds and hedge fund industry trends. This research paper is designed to provide data and insights with the objective of helping investors to better understand hedge funds and their benefits.
CHANGE IN AUM (1 YR)
Headline performance
The hedge fund industry was up 11.3% for the year on an asset weighted basis. This compares to the mean figure of 10.3%, suggesting that, on average, larger hedge funds have outperformed. The median performing hedge fund returned 9.3% for the year. The median performing hedge fund sub-strategies was credit – distress (ranked 19th out of 37 sub-strategies returning 11.1%). The largest constituent of the hedge fund universe was equity long/short ~21% of assets), followed by long biased which constitutes ~16%. Multi-strategy was the strongest performing strategy returning 13.6% on an asset weighted basis. Equity long/short delivered similar strong performance of 13.5% – also outperforming the HF Composite figure, which was dragged down by underperformance from long biased, quant, event, credit, macro and arbitrage strategies.
NET RETURN (1 YR)
At a sub-strategy level, performance was rather similar to that seen in 2023; six of the top ten sub-strategies in 2024 were also in the top ten in 2023 (and the best performing sub-strategy – quant – multi, was a newly introduced classification in 2024).
At a sub-strategy level, performance was rather similar to that seen in 2023; six of the top ten sub-strategies in 2024 were also in the top ten in 2023 (and the best performing sub-strategy – quant – multi, was a newly introduced classification in 2024). As in 2023, strong equity market performance during the year provided a significant tailwind to more long-biased and/or historically higher beta strategies such as ELS – APAC (+16.9%), long – equity (+14.4%), ELS – sector (+14.1%), ELS – US (+14.0%) and ELS – global (+14.0%).
On the other end of the scale, it was a similar picture; two of the five worst performing sub-strategies in 2024 were also in the bottom five in 2023. These were arb – tail (-2.9%), quant – CTA (+1.5%), arb – vol (+2.7%) and long – commods (+3.6%). It’s worth noting, in this strong year for hedge fund performance, that only one sub-strategy had negative returns for the year: arb – tail (-2.9%).
Returns weren’t generated evenly across the year – the hedge fund composite performance in Q1 was +5.0%, whereas it was +1.2% in Q2, +2.4% in Q3 and +2.3% in Q4. April (-0.2%) was the weakest month during the year in equity markets (- 3.5%) and corresponded to the only down month in 2024 for the hedge fund composite. The negative industry performance that month was driven by those strategies more correlated to risk assets i.e. long biased, equity l/s and event (particularly event – activist).
The strongest month for the HF Composite occurred in March (+2.1%), driven by strong performance across the board, with every sub-strategy positive during the month apart from arb – tail. The second-strongest month during the year was November when the hedge fund composite was +1.9% – benefiting from buoyant investor sentiment in the wake of the US presidential election. Event driven and equity l/s sub-strategies performed particularly well in November, with event – activist up +4.5%, ELS – sector +3.5%, ELS – US +3.0% and event – opp +2.9% leading the charge. It was also the strongest month of the year for multi-strategy, +2.1%, which as one of the largest sub-strategies was therefore a material driver of the overall strong return for the month.
Five-year performance (CAR) for hedge funds now stands at 6.8%, markedly outperforming bonds (-2.0%) but underperforming equities (+7.7%) from a total return perspective, however, outperforming equities from a risk-adjusted perspective (Sharpe of 0.7 vs 0.4 RFR: 2.73%).
Dispersion
As can be seen in the following chart, dispersion between top and bottom decile performing hedge funds rose a little during 2024, when compared with 2023, however it is significantly lower than that observed during the COVID-19 pandemic, and more in line with recent historical averages.
10th – 90th PERCENTILE 12M ROLLING PERF. SPREAD[1]
STANDARD DEVIATION (1 YR)
Strategy performance
Multi-strategy was the best performing headline strategy in 2024, up +13.6%. Multi-strategy has been the best long-term performing, consistent strategy (5y CAR of 11.3% with a Sharpe of 2.2). Ranking second out of the eight, was equity long/short, (+13.5%), the only other master strategy to outperform the hedge fund composite, with a number of sub-strategies among the top performers. Quant (+8.7%) was the master strategy group with the best performing sub-strategy: quant – multi (+17.4%) ranking 1st out of all 37 sub-strategies, but the quant master strategy group underperformed the hedge fund composite.
The lowest performing strategy was arbitrage (+5.9%), driven by material underperformance from the arb – tail sub-strategy (-2.9%) and mediocre performance from arb – vol (+2.7%). Much like in 2023, it’s no surprise that tail hedging strategies would underperform in 2024 given the falling realised and implied volatility and negative beta associated with the strategy. Arb – vol strategies had performed well in the more elevated volatility regime in 2022, with 2023 and 2024 a much more muted environment for the strategy. The arbitrage strategy has also historically been persistently less volatile than other master strategies.
The second-lowest performing master strategy was quant (+8.7%), with the overall figure materially dragged down due to significant underperformance from CTAs (quant – CTA: +1.5%) and marginal underperformance from quant – macro (+9.6%) relative to the broader universe.
The third-lowest performing master strategy was macro, albeit with performance of +9.6%. Macro sub-strategies which underperformed the master strategy included macro – commods (+3.5%), macro – FIRV (+7.6%) and macro – global (+9.4%).
NET RETURN OF MASTER STRATEGIES (1 YR)
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Presented on an equally weighted basis. Source: Aurum Hedge Fund Data Engine.
*HF Composite = Aurum Hedge Fund Data Engine Asset Weighted Composite Index.
**Bonds = Bloomberg Global Aggregate Bond Index.
***Equities = S&P Global BMI (US Dollar).
All figures and charts use asset weighted net returns unless otherwise stated. All Hedge Fund data is sourced from Aurum Hedge Fund Data Engine. Data included in this report is dated as at 20th January 2025.
The Hedge Fund Data Engine is a proprietary database maintained by Aurum Research Limited (“ARL”). For information on index methodology, weighting and composition please refer to https://www.aurum.com/aurum-strategy-engine/. For definitions on how the Strategies and Sub-Strategies are defined please refer to https://www.aurum.com/hedge-fund-strategy-definitions/
Bond Index
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