North American hedge funds fall $34.7 billion from April 2022 peak

Opalesque Industry Update – The 2020s have seen seismic shifts in the North American hedge fund industry with the emergence of the coronavirus and the resulting global economic fallout causing investor sentiment and stock markets to plummet. North American hedge fund assets under management have taken a severe hit, falling by a record $249.1 billion in the first quarter of 2020 as risk-averse investors seek to preserve capital.

Following the sharp drop in stock markets, the Federal Reserve reacted aggressively, cutting benchmark interest rates to zero and re-initiating quantitative easing. The US government has also rolled out billions of dollars in stimulus packages to support the US economy.

Investor sentiment and stock market performance have picked up, benefiting the hedge fund industry which has rebounded strongly from its March 2020 low ($2,134.5 billion), reaching a high of 2,516.7 billion in April 2022. The positive trend reversed in May 2022 as continued inflationary pressure forced the Federal Reserve to tighten monetary policy which, with the invasion of Ukraine, commodity prices commodities and continued friction between the US and China, has dampened market risk sentiment.

• At the end of June 2022, assets under management for the North American hedge fund industry decreased by $34.7 billion from their peak in April 2022 and currently stands at $2,482.1 billion of dollars.

• At the end of June 2022, assets under management for the North American hedge fund industry decreased by $34.7 billion from their peak in April 2022 and currently stands at $2.482 billion .

• North American hedge funds with a global mandate saw their share of assets under management increase from 60.6% in 2007 to 69.3% in 2022, driven by growing investor demand for a more diversified portfolio after 2008 .

• The share of large hedge funds ( > $500 million ) increased by 9.1% between 2007 and 2022. Conversely, small hedge funds ( • Approximately 51% of current North American hedge funds have a track record at least 13. Only about 19% of hedge funds survive beyond 20 years.

• The hedge fund prime brokerage industry continues to be dominated by large US and European banks. Goldman Sachs, JPMorgan Chase and BNP Paribas Fortis collectively oversee 47% of the sector’s assets under management.

• The Eurekahedge Trend Following Index returned 15.7% in the first half of 2022, outperforming all other hedge fund strategies tracked by With Intelligence.

• Trend-following hedge funds managed to generate the highest three-year annualized return of 10.9%.

Carol N. Valencia