The stock market rally since the election has pushed the value of hedge fund assets to a record level, despite sustained withdrawals from investors.
Total hedge fund capital passed $3 trillion in the fourth quarter of 2016, a $47 billion increase. Overall, the industry gained $121 billion last year, the largest annual increase since 2014, according to a new report from Hedge Fund Research.
However, that growth hasn’t convinced investors to stay the course.
“Growth occurred against a backdrop of mixed withdrawals, as investors and institutions positioned for continued geopolitical and economic uncertainty in 2017, including the new Trump administration, progression toward Brexit implementations and uncertain European elections in Netherlands, France, Germany and Italy,” HFR President Kenneth J. Heinz said in a statement.
Redemptions for the quarter reached $18.7 billion, following $28 billion in withdrawals in the third quarter. For all of 2016, investors redeemed more than $70 billion, the largest annual outflow since 2009. Hedge funds typically draw institutional investors and charge fees far above those found in other types of investments. Individual hedge funds typically do not make their performance public.
While hedge funds have historically been able to deliver outsized gains, many have struggled in recent years to top broader market returns. Still, they may stand to gain if Trump follows through on his promise to bring deregulation to both businesses and Wall Street.
Top hedge fund managers earn billions of dollars, and their pay increased up to 11 percent last year, according to a separate report last November.