In 2024, hedge funds (HFs) delivered differentiated performance – the second highest returns over the last 10 years.
The 2020s have so far been a broadly favourable period for HFs, with high returns and significant alpha after the low returns and limited alpha of the 2010s. HF performance this decade is especially impressive given the hugely varying market conditions that prevailed during the COVID-19 crisis and the post-pandemic period, which has been characterised by swings in inflation and rates, as well as dramatic changes in market sentiment.
In 2024, hedge funds demonstrated their ability to deliver strong results in a relatively stable interest rate environment. Overall performance was impressive: returns of 10.1%, with alpha of 2.1% (see chart) – more than in 2023, despite almost identical risk-free-rate and beta risk premium environments.
When compared to other benchmarks, hedge fund performance looks healthy. For example, the asset class outperformed the high-yield index, and fell just short of the traditional 60/40 portfolio benchmark commonly used by large investors, which returned 10.2%.
