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A member of staff poses next to trading boards at the London Stock Exchange on April 25, 2025 in London, England.
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The amount of money managed by hedge funds has reached an all-time high of $5 trillion, fueled by a surge in capital allocations in the third quarter coupled with positive investment returns.
Analysis published Thursday by industry tracker Hedge Fund Research (HFR) showed total global assets under management stood at a landmark $4.98 trillion at the end of the third quarter.
Overall industry assets swelled by $238.4 billion in the three-month period that ended Sept. 30.
This included $33.7 billion in net new allocations from investors such as pension funds, insurance companies, sovereign wealth funds, endowments and family offices. HFR said that was the biggest quarterly net asset inflow since the third quarter of 2007 — before the Global Financial Crisis.
The remainder of the third-quarter capital increase stemmed from positive trading gains made by managers throughout the three-month period.
Here, HFR’s main Fund Weighted Composite Index — which aims to provide an overall snapshot of the industry — gained 5.4% during the period.
The index, which tracks the gains and losses of more than 1,400 single manager funds across all strategy types, is up 9.5% since the start of 2025.
HFR president Kenneth Heinz said the “historic growth” has been driven by a mix of rising M&A activity among corporates, successful bets on the ongoing AI and tech boom and growing expectations for lower interest rates.
“While risk-on sentiment has dominated recent months, risks have also evolved, with managers participating in acceleration of these trends through year end but also positioning for sentiment and trend reversals across equities, commodities, currencies and cryptocurrencies,” Heinz said.
More to come?
The big winners during the third quarter were equity hedge fund managers, who trade stocks long and short, often using thematic analyses, sector-specific approaches and fundamental single-company research.
During the third quarter, they made 7.2% in investment returns, and saw their assets grow by $96.7 billion, including positive investor net inflows of $18 billion.
Overall, that brought equity-focused funds’ total capital to $1.5 trillion — making them the biggest hedge fund sub-strategy in terms of assets. Year-to-date, stock-picking strategies have gained about 13.6%.
The other key beneficiary has been macro hedge funds, which invest in macroeconomic and geopolitical trends using equities, bonds, currencies, commodities and other assets.
General view of the City of London skyline, the capital’s financial district.
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Macro strategies’ assets grew by $33.5 billion overall during Q3, with clients pouring in $1.7 billion net, bringing total macro capital to $759 billion.
Macro managers added 4.7% in investment returns in Q3. Having recouped losses suffered earlier in the year, the sector is up 3.8% in the nine months to the end of September.
Heinz said the industry can expect more money to flow into its coffers as investors look to traverse a challenging geopolitical environment and trade policy uncertainty.
“Institutions seeking to strategically position for these trends, including both continued acceleration and defensive reversals, are likely to increase allocations to managers which have demonstrated their ability to navigate both the recent risk-on trends, as well as volatile reversals, with these allocations set to drive industry growth beyond the $5 trillion milestone into year-end.”
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NatWest Group’s chief executive has warned the government against increasing taxes on banks in the autumn budget as the high street lender reported a 30% jump in profits.
Paul Thwaite said he understood the “difficult choices” that the chancellor, Rachel Reeves, had to make in order to help close a potential £30bn shortfall in the public finances but argued she needed to “balance fiscal discipline” with “policies that create stability, consistency and support growth”.
Twaite said on a call with journalists on Friday: “I think the government should be thoughtful about signals it sends to investors who are looking at the UK as a long-term home for capital.”
His comments came as NatWest reported a strong jump in profits, which grew 30.4% to £2.18bn in the three months to the end of September, from £1.67bn during the same period last year.
“My view remains that strong economies need strong banks, and I really want to use the capital of the bank to support our customers,” Thwaite said. “You can see in our numbers today, we’re providing a lot of capital to those who are buying houses or moving houses, a lot of capital to businesses … So I think it’s important that strong domestic banks are the backbone of the UK, and the best way to use our capital is to support customers.”
The once bailed-out bank – which shed its final UK government stake earlier this year – said it was upping its full-year profitability and income guidance. It now expects income for 2025 to come in at £16.3bn, excluding notable items, solidifying previous forecasts for income greater than £16bn. Shares rose 2.9% on Friday morning, making the bank one of the biggest risers on the FTSE 100.
Thwaite’s warnings come amid speculation over a number of potential tax increases, including on banks, property and landlords’ rental income, which could help the chancellor shore up the public finances in the budget on 26 November.
Major UK bank stocks tumbled in August amid fears that the government could follow recommendations by the Institute for Public Policy Research, a thinktank, to introduce a new tax on the banking sector. That tax would help recover “windfalls” enjoyed by lenders as a result of an emergency economic policy known as quantitative easing that was put in place after the 2008 financial crisis.
Thwaite echoed comments by high street bank peers including the Lloyds chief executive, Charlie Nunn, who previously said a rise in bank taxation “wouldn’t be consistent” with the chancellor’s overtures as the government pushes to reboot growth.
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Labour has placed financial services among its eight key sectors to receive government backing in its industrial strategy, while industry lobbyists have warned that the UK could lose business and make its financial services less competitive compared with other hubs including the US.
Thwaite said: “I’ve been encouraged by what the chancellor and government have said and about how they see the role of financial services and banks in helping support that growth agenda. I do welcome those comments from NatWest’s perspective. I want us to play our part. Those messages have resonated well with investors. They have supported confidence in the sector.”
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