Investor types

Hedge funds

Hedge funds are pooled investment funds that trade liquid securities using leverage and short selling, and charge both management and performance fees. Industry capital stood at a record US$5.64tn at the end of the third quarter of 2026.

What hedge funds are

A hedge fund pools capital from investors and trades mainly liquid securities, using leverage, short selling and derivatives with the aim of producing returns that depend less on the direction of markets. The manager charges a management fee on assets and a performance fee on returns.

Hedge funds differ from private credit funds and from private equity funds in their liquidity terms: investors can usually redeem periodically, and holdings are valued at market prices. The line has blurred, because many hedge fund managers now run credit and private market strategies. Their use of short selling, leverage and performance fees distinguishes them from asset managers in general.

Scale of the hedge fund industry

Total global hedge fund industry capital reached US$5.64tn at the end of the third quarter of 2026, the 16th consecutive quarterly increase (HFR, 22 October 2026).¹ In the first three quarters of 2026 industry capital rose by US$480bn, including investor inflows of US$124.1bn.¹

The second quarter of 2026 set a record. Industry capital ended that quarter at US$5.6tn after growing by US$409.3bn, the largest quarterly asset increase on record (HFR, 23 July 2026).²

In the Gulf, the Dubai International Financial Centre reported that it was home to 102 hedge funds at the end of 2025 (DIFC, 5 February 2026).⁵

Strategies and sub-types

HFR classifies hedge funds into four main strategy groups. Capital at the end of the third quarter of 2026 was as follows (HFR, 22 October 2026):¹

Strategy	Capital, end Q3 2026
Equity hedge	US$1.72tn
Event-driven	US$1.57tn
Relative value	US$1.45tn
Macro	US$897.4bn

Multi-strategy funds increased by US$19.8bn in the third quarter of 2026 to a record US$900bn.¹ Multi-strategy platforms allocate capital to many separate trading teams under central risk limits. Equity hedge funds take long and short positions in shares, and some combine listed and late-stage private companies. Macro funds, including systematic trend-following funds, trade interest rates, currencies and commodities. Event-driven funds invest around mergers, restructurings and other corporate events, including distressed situations.

Most funds use a master-feeder structure, in which investors subscribe through onshore and offshore feeder funds that invest in a single offshore master fund.

Source of capital and liquidity

Hedge fund capital comes from two sources: institutions (including sovereign wealth funds, pension funds and endowments) and private wealth, including family offices. Liquid strategies usually offer monthly or quarterly redemption. Funds that hold illiquid investments protect remaining investors through lock-up periods, redemption gates and side pockets, which separate hard-to-value holdings from the liquid portfolio so that redeeming investors cannot draw liquidity against them.

Hedge funds in private markets

Larger hedge fund managers now invest in private credit and other private transactions alongside their trading books: direct corporate lending, asset-based finance, pre-IPO equity, distressed restructurings and bank capital relief transactions. In these transactions they compete with private credit funds and structured credit investors. They tend to focus on complex or time-sensitive situations and on unrated borrowers, underwriting credit internally and hedging some risks in public markets.

How allocators decide

Investor demand is not matched by conversion. Cherry Bekaert, citing Barclays' outlook for the second half of 2026, based on 340 investors with US$8.7tn of assets, reports that allocators ultimately commit capital to roughly 5% of the managers they meet. Net allocation interest rose to 43% from 37% a year earlier (Cherry Bekaert, 8 October 2026).⁶

Operational due diligence now decides allocations. Investment and operational diligence run in parallel from first contact, so that allocators assess infrastructure, governance and risk management alongside strategy and track record.⁶ Cherry Bekaert attributes much of the attrition to managers that clear the investment test and fail the operational one, citing an unclear valuation policy, compliance gaps, thin finance coverage and a vital process that depends on one person. A manager without a current due diligence questionnaire library can be eliminated before a meeting is scheduled.⁶

Inside the fund, portfolio managers trade within risk limits set and monitored centrally, while private transactions generally require approval by an investment committee.

Where investor money is going

Inflows concentrate in the largest firms. Firms managing more than US$5bn received an estimated US$113.7bn of the US$124.1bn of net inflows in the first three quarters of 2026 (HFR, 22 October 2026).¹ In the third quarter alone they received an estimated US$36.6bn, more than the estimated US$34.5bn of net new capital for the industry as a whole. Mid-sized firms managing US$1bn to US$5bn had a net outflow of US$2.3bn in that quarter, and firms managing less than US$1bn received a small inflow of US$190m. Over the first three quarters as a whole, mid-sized firms were allocated US$8.0bn and smaller firms US$2.4bn.¹

Regulation and governance

In the United States, SEC-registered investment advisers must file Form PF if they and their related persons have at least US$150m of private fund assets under management. Form PF gives the Securities and Exchange Commission, the Commodity Futures Trading Commission and the Financial Stability Oversight Council confidential information about private funds and their advisers. On 20 April 2026 the SEC and CFTC proposed raising the filing threshold to US$1bn, and the threshold for large hedge fund advisers from US$1.5bn to US$10bn of hedge fund assets.⁷

In the UK and the European Union, hedge fund managers are authorised and supervised under the alternative investment fund managers regime, in the UK by the Financial Conduct Authority. Prime brokers' margin terms and the banks' own capital rules also constrain how much leverage a fund can use.

Trends in 2025 and 2026

New fund formation recovered in 2025. HFR counted 561 hedge fund launches in 2025, the highest annual total since 2021. It estimated 287 liquidations in the same year.³

Activity in 2026 has been uneven. The first quarter saw 166 launches and 129 liquidations.³ In the second quarter launches fell to 100 and liquidations to 70 (HFR, 13 October 2026).⁴ Meanwhile total industry capital continued to rise in each quarter to a record US$5.64tn, with new money concentrated in the largest firms.¹

Notable hedge fund managers

Name	Headquarters	Assets under management, with date
Man Group	London	US$270.9bn, 30 September 2026^8,9
Millennium Management	New York	More than US$95bn, with more than 370 investment teams, company website, October 2026¹⁰
Point72	Stamford	About US$58.5bn, 1 July 2026¹¹
Balyasny Asset Management	Chicago	US$37bn, 1 October 2026¹²

How prime brokers and advisers work with hedge funds

HFR reported that Goldman Sachs and UBS led prime brokers by assets under management at the end of the second quarter of 2026.⁴ Capital introduction teams at prime brokers and third-party marketers introduce hedge fund managers to potential investors.

Hedge funds that run credit and private market strategies are counterparties for companies and sponsors that need capital quickly or in complex situations. Advisers bring them structured debt, recapitalisations and refinancings of asset-backed lending facilities. Anglo-Suisse Capital advises on capital raising, M&A and secondary transactions with professional investors.

Frequently asked questions

How large is the hedge fund industry?

Total industry capital was US$5.64tn at the end of the third quarter of 2026, according to HFR.¹

Are investors adding money to hedge funds?

Yes. Investor inflows totalled US$124.1bn in the first three quarters of 2026.¹

Which hedge funds receive most new money?

Firms managing more than US$5bn, which received an estimated US$113.7bn of net inflows in the first three quarters of 2026.¹

How selective are hedge fund allocators?

Barclays survey data cited by Cherry Bekaert show allocators commit capital to roughly 5% of the managers they meet.⁶

Why do managers fail operational due diligence?

Common reasons include an unclear valuation policy, compliance gaps, thin finance coverage and key processes that depend on one person.⁶

What is a side pocket?

A separate account within a fund that holds illiquid or hard-to-value investments apart from the liquid portfolio, so that redeeming investors cannot draw liquidity against them.

Can new hedge fund managers still launch?

Yes. HFR counted 561 launches in 2025, the highest annual total since 2021.³

Which prime brokers lead the market?

Goldman Sachs and UBS led prime brokers by assets under management at the end of the second quarter of 2026, according to HFR.⁴

Working with Anglo-Suisse Capital

Anglo-Suisse Capital advises companies, fund managers and shareholders on capital raising, M&A and secondary transactions with professional investors in the UK, Switzerland and internationally.

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Sources

This page is general information for professional investors and is not investment advice. Figures are taken from the sources listed, as at the dates stated.