Key Points
- Global hedge fund assets have hit an all-time high of almost $5.2 trillion
- Their coffers swelled by a record $642.8 billion in 2025
- The most favored strategy type among investors was long/short equity
Global hedge fund assets have hit an all-time high of almost $5.2 trillion after investors poured more money into the industry last year than at any other time since before the Global Financial Crisis. Hedge funds’ coffers swelled by a record $642.8 billion in 2025, driven by a mix of strong capital inflows from investors and positive investment performances, according to new data published by industry tracker Hedge Fund Research. Investors added $115.8 billion in net new capital to the sector last year, the biggest since 2007’s $194.5 billion, as client subscriptions outweighed withdrawals. At the same time, the industry’s 12.6% annual return, its best showing since 2009, translated into performance gains of $527 billion. Overall, the most favored strategy type among investors was long/short equity, in which managers aim to profit from both rising and falling stocks, which drew $48.6 billion in net new money last year. HFR analysis suggests that appetite for hedge funds is rebounding after a tricky time for the industry. Investors have pushed back on lofty management and performance fees in recent years, as alpha generation has been hard to achieve during rising markets, resulting in patchy returns for the industry as a whole. But highlighting hedge funds’ “successful navigation of volatility” last year, HFR president Kenneth Heinz said investment uncertainty is likely to be “the dominant theme” for 2026, which could tempt more capital back to the industry. As global markets regain ground following last week’s tariff-related turbulence, Man Group, the world’s largest publicly traded hedge fund and alternative assets firm, said conditions are now “ripe for alpha generation” in single-stock names rather than broader thematic bets. In a note, the $214 billion London-based company upgraded three hedge fund strategies — long-biased equity long/short, market-neutral equity long/short and merger arbitrage — from neutral to positive. Adam Singleton, chief investment officer of external alpha within Man Group’s Solutions business, said these strategies are well-placed to capitalize on “late-cycle dynamics”. He pointed to widening dispersion across AI-linked stocks, compounded by uncertainty over geopolitics and speculation over the new chair of the Federal Reserve. “We see these forces creating a volatile backdrop,” Singleton added.