US Hedge Fund Market by Type, Method, and End-user - Forecast and Analysis 2024-2028

US Hedge Fund Market Forecast 2024-2028 

The US hedge fund market size is forecast to increase by USD 662.74 million, at a CAGR of 7.9% between 2023 and 2028. Market growth hinges on various factors, including growing investor interest in alternative investments, evolving investment strategies and asset classes, and innovations in fee structures and fee pressure of funds in the US. These elements shape market dynamics, reflecting the changing preferences and approaches of investors. With increasing interest in alternative investments and ongoing innovations in fee structures, the market anticipates continued growth opportunities, adapting to evolving investor needs and market trends. The report provides market size, historical data spanning from 2018-2022, and future projections, all presented in terms of value in USD billion for each of the mentioned segments.

What will be the Size of the Market During the Forecast Period?

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Market Dynamic and Customer Landscape

The market attracts a diverse range of participants, from institutional investors to high-net-worth individuals, seeking alternative investments to navigate market volatility and geopolitical concerns. Asset management businesses employ sophisticated risk management techniques within the long/short equity and offshore segments to optimize tax efficiency and ensure global access. Offshore jurisdictions facilitate the management of assets under management value, pooled in collective investment funds. Leveraging AIML, operators blend diverse investment backgrounds to pursue alpha while managing risk and minimizing expenses. Yet, regulatory requirements and complex operational needs remain significant barriers to entry. The rise of Crypto Hedge Funds capitalizes on cryptocurrency values and blockchain technology, especially in the Asia-Pacific region. Our researchers analyzed the data with 2023 as the base year, along with the key drivers, trends, and challenges. A holistic analysis of drivers will help companies refine their marketing strategies to gain a competitive advantage.

Key Market Driver

Growing investor interest in alternative investments is the key factor driving the market. Alternative investment refers to a financial asset that does not fall into one of the conventional investment categories, such as stocks, bonds, and cash. Investors in the US seek to diversify their portfolios beyond traditional asset classes like stocks and bonds to mitigate risk and enhance returns. Alternative assets, such as hedge funds, offer low correlation with traditional assets, providing diversification benefits. The rise in the inflation rate in the US is one of the major factors driving the demand for alternative investments. The US experiences higher-than-usual inflation growth of around 2% every year.  

Additionally, alternative assets such as hedge funds have the potential to generate higher returns compared to traditional investments over the long term. In addition, hedge funds employ strategies aimed at managing downside risk and preserving capital during market downturns. Investors allocate to funds as a way to mitigate portfolio risk and protect against market volatility. Therefore, such factors are driving the demand for alternative investments, such as hedge funds in the US, which, in turn, is expected to propel the growth of the market during the forecast period.

Significant Market Trends

The adoption of technological advancements by companies is the primary trend shaping the market. Market players are increasingly adopting technological innovations such as algorithmic trading, big data analytics, machine learning, and others that have transformed the hedge fund industry in the US. For instance, vendors such as Elliott Investment Management LP adopted artificial intelligence (AI) to assist in effectively achieving overall portfolio risk management goals.  In addition, hedge funds increasingly utilize complex quantitative models and algorithmic trading strategies to identify trading opportunities, execute trades at high speeds, and manage risk more effectively.

Furthermore, cloud computing enables hedge funds to access scalable computing power and storage resources on-demand, facilitating data processing, analytics, and modeling tasks. Cloud-based infrastructure also enhances collaboration and flexibility, allowing hedge funds to adapt quickly to changing market conditions and scale their operations efficiently. Therefore, the adoption of such technological advancements is expected to drive the growth of the market during the forecast period.

Major Market Challenge

Regulatory constraints is the major challenge that affects market expansion. Regulations such as registration requirements, reporting obligations, and restrictions on certain investment strategies may impede fund manager ability to operate and attract capital. Hedge funds in the US are subject to Securities and Exchange Commission (SEC) regulations, particularly under the Investment Advisers Act of 1940. This includes registration requirements for investment advisers managing assets above certain thresholds and adherence to fiduciary duties owed to clients. Hedge funds engaging in commodity futures trading or derivatives transactions are subject to regulations enforced by the commodity futures trading commission (CFTC).

Additionally, the presence of regulatory constraints imposes compliance obligations and operational challenges on hedge fund managers, negatively influencing fund operations, investment strategies, and fundraising activities. Moreover, meeting regulatory requirements often entails significant costs for hedge fund managers. Compliance efforts involve hiring legal and compliance professionals, implementing robust reporting and record-keeping systems, and conducting regular audits and reviews to ensure adherence to regulations. Thus, such factors are expected to decline the growth of the market during the forecast period.

Market Customer Landscape

The market forecasting report includes the adoption lifecycle of the market, covering from the innovator’s stage to the laggard’s stage. It focuses on adoption rates in different regions based on penetration. Furthermore, the report also includes key purchase criteria and drivers of price sensitivity to help companies evaluate and develop their market growth analysis strategies.

 Customer Landscape

Who are the Major Market Companies?

Companies are implementing various strategies, such as strategic alliances, partnerships, mergers and acquisitions, geographical expansion, and product/service launches, to enhance their presence in the market.

• Bridgewater Associates LP: The company offers three types of hedge funds such as Pure Alpha fund, the All Weather fund, and the Pure Alpha Major Markets funds for investors.

The market research and growth report also includes detailed analyses of the competitive landscape of the market and information about 15 market companies, including:

• BlackRock Inc.
• Capula Investment Management LLP
• Citadel Enterprise Americas LLC
• Coatue Management L.L.C.
• D. E. SHAW and CO. L.P.
• Davidson Kempner Capital Management
• Elliott Investment Management LP
• Farallon Capital Management L.L.C.
• Man Group
• Millennium Management LLC
• PIMCO
• Renaissance Technologies LLC
• Tiger Global Management LLC
• Two Sigma Investments LP

Qualitative and quantitative analysis of companies has been conducted to help clients understand the wider business environment as well as the strengths and weaknesses of key market players. Data is qualitatively analyzed to categorize companies as pure play, category-focused, industry-focused, and diversified; it is quantitatively analyzed to categorize companies as dominant, leading, strong, tentative, and weak.

What are the Largest-Growing Segments in the Market?

In the market, institutional investors and high-net-worth individuals seek alternative investments to navigate market volatility and geopolitical concerns. Asset management businesses employ sophisticated risk management techniques in the long/short equity segment and offshore segment for tax efficiency and global access. Utilizing AIML, they optimize portfolio construction to generate alpha while managing risk and expenses. However, regulatory requirements and complex operational requirements pose challenges. Emerging trends include crypto hedge funds, driven by cryptocurrency values and blockchain technology in the Asia-Pacific region.

The offshore segment is estimated to witness significant growth during the forecast period. The offshore segment in the hedge fund market in US refers to hedge funds that are domiciled and operated in offshore jurisdictions but are managed or marketed by firms based in the United States. Offshore hedge funds are established in offshore financial centers and are known for their favorable regulatory environment, tax treatment, and legal infrastructure. 

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The offshore segment was the largest segment and was valued at USD 472.43 billion in 2018. Furthermore, offshore jurisdictions serve as hubs for wealth management services, including private banking, trust administration, asset protection, and estate planning. Hedge funds domiciled offshore can leverage these services to manage assets, optimize tax efficiency, and preserve wealth for their investors. Therefore, the offshore segment is expected to grow in the hedge fund market in US during the forecast period.

Segment Overview

The market report forecasts market growth by revenue and provides an analysis of the latest trends and growth opportunities from 2018 to 2028. 

• Type Outlook 
  • Offshore
  • Domestic
  • Fund of funds

• Method Outlook 
  • Long and short equity
  • Event driven
  • Global macro
  • Multi strategy and others

• End-user Outlook 
  • Institutional
  • Individual

Market Analyst Overview:

United States hedge fund market, overseeing the industry's assets under management (AuM). With the rise of AIML (artificial intelligence and machine learning), hedge funds embrace "plug and play" operations while exploring opportunities in the cryptocurrency sector. The emergence of over three hundred crypto hedge funds underscores the growing significance of digital assets and their potential for high returns. As these assets become more accepted by mainstream financial institutions and corporations, the market witnesses a surge in cryptocurrency-related products and services, creating new business opportunities and revenue streams for service providers.

Furthermore, in the dynamic market, firms like Investcorp-Tages and Engadine Partners lead the charge, capitalizing on investment opportunities within the cryptocurrency realm and its related assets. With a focus on uncorrelated assets against traditional markets, these entities navigate the evolving landscape of digital asset investing. As acceptance of digital assets grows, so does the demand for supporting technology such as trading platforms and custody solutions, ensuring robust infrastructure for managing the AUM of US crypto hedge funds.

Market Scope
Report Coverage	Details
Page number	136
Base year	2023
Historic period	2018-2022
Forecast period	2024-2028
Growth momentum & CAGR	Accelerate at a CAGR of 7.9%
Market Growth 2024-2028	USD 662.74 billion
Market structure	Fragmented
YoY growth 2023-2024(%)	7.4
Competitive landscape	Leading Companies, Market Positioning of Companies, Competitive Strategies, and Industry Risks
Key companies profiled	BlackRock Inc., Bridgewater Associates LP, Capula Investment Management LLP, Citadel Enterprise Americas LLC, Coatue Management L.L.C., D. E. SHAW and CO. L.P., Davidson Kempner Capital Management, Elliott Investment Management LP, Farallon Capital Management L.L.C., Man Group, Millennium Management LLC, PIMCO, Renaissance Technologies LLC, Tiger Global Management LLC, and Two Sigma Investments LP
Market dynamics	Parent market analysis, Market growth inducers and obstacles, Fast-growing and slow-growing segment analysis, COVID-19 impact and recovery analysis and future consumer dynamics, and market condition analysis for the forecast period.
Customization purview	If our report has not included the data that you are looking for, you can reach out to our analysts and get segments customized.

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What are the Key Data Covered in this Market Research Report?

• CAGR of the market during the forecast period
• Detailed information on factors that will drive the market growth and forecasting between 2024 and 2028
• Precise estimation of the market size and its contribution to the market in focus on the parent market
• Accurate predictions about upcoming market growth and trends and changes in consumer behavior
• Growth of the market across US
• A thorough analysis of the market’s competitive landscape and detailed information about companies
• Comprehensive analysis of factors that will challenge the growth of market companies

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