Hedge Funds (HF) were up +9.7% in 2024, supported by L/S Equity, EM-focused and deep Event-Driven strategies. CTAs were the main underperformers. HF outperformed diversified global allocations, including 40/60 equity/bond portfolios, up +6.2%. Furthermore, HF volatility was lower, with lower net exposures. Overall, the HF industry continued to produce very strong alpha in 2024, up an estimated 6.2% y/y. Positive HF performance and the search for diversification are spurring renewed interest and flows in the asset class. Preqin estimates that HF’s AuM progressed in 2024, reaching $4.9tn as of Q3.

Stage of the economic cycle is crucial for HF allocations

We remain in an atypical cycle: extreme inflation and rising rates resulted in a significant economic slowdown from late-2021 to mid-2023, but did not lead to a recession. Since then, economies have been recovering, reverting to cruise level, supported by central bank rate cuts amid continued disinflation and still elevated fiscal spending. 

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