Hedge Fund Capital Still on the Rise

Hedge fund capital rose for the eighth straight quarter in Q3 2025, with total capital rising $238.4 billion to hit yet another peak just shy of $5 trillion.

The latest HFRE Global Hedge Fund Industry Report finds that investors allocated $33.7 billion in new capital to the industry, what HFR says is the highest quarterly net asset inflow since Q3 2007. Year-to-date the industry has attracted $71 billion in inflow, the strongest three-quarters gain since 2014.

Performance played a major role in the capital growth, with the HFR Fund-Weighted Composite Index rising 5.4% over the quarter, bringing year-to-date performance to +9.5%. Macro funds were up 4.7% in the quarter for a+3.4% year-to-date return, while assets allocated to the strategy increased $1.7 billion, on top of which performance gains meant an increase of $33.5 billion in Q3., Total Macro capital now stands at $759 billion, according to the HFR, which adds that Macro sub-strategy asset increases in Q3 were led by systematic diversified funds, which added $12.2 billion during the quarter as the strategy continued to recover from a horrible April.

The largest asset inflows were in Equity Hedge at $18 billion, followed by Relative Value Arbitrage at $9.4 billion and Event Driven at $4.6 billion. HFR says allocations were concentrated in the industry’s largest firms again in Q3, with managers with over $5 billion AUM seeing $32.2 billion in quarterly net inflows, while mid-sized firms ($1-5 billion AUM) were allocated a net $0.59 billion, and smaller firms (under $1 billion AUM) added $0.88 billion. Through the first three quarters, large firms experienced inflows of $62.1 billion, mid-sized $3.8 billion, and smaller managers $5.1 billion, HFR adds.

“The hedge fund industry has experienced historic growth and performance in recent months, with total assets surging to the verge of the historic $5 trillion milestone to end third quarter,” says Kenneth Heinz, president of HFR. “This historic growth has been driven by a combination of powerful trends including accelerating M&A, expanding cryptocurrency investment, falling geopolitical risk, expectations for lower interest rates, and an unprecedented surge in strategic AI investment and infrastructure.

“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,” he continues. “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.”