Global hedge fund industry assets reached a record $4.98 trillion in the third quarter of 2025 as managers and investors capitalised on a broad risk-on environment across strategies and regions, according to research firm HFR’s data.

Industry capital rose by $238.4 billion over the quarter, while investors added $33.7 billion in net new allocations, the highest quarterly inflow since the third quarter of 2007. Year-to-date inflows reached $71 billion.

The HFRI Fund Weighted Composite Index gained 5.4% in the quarter, led by 7.2% gains in the Equity Hedge (Total) Index and 4.7% in the Macro (Total) Index. Through September, the composite index was up 9.5%, supported by multi-strategy and fundamental growth approaches. The HFR Cryptocurrency Index surged 20.3% in the quarter, recovering early-year losses.

Equity Hedge strategies expanded by $96.7 billion in Q3, including $18 billion in net inflows, lifting total assets to $1.5 trillion. Event-Driven strategies added $66.7 billion to reach $1.41 trillion, while Relative Value Arbitrage grew by $41.6 billion to $1.32 trillion, supported by $9.4 billion of inflows. Macro strategies rose by 33.5 billion to $759 billion, with systematic diversified funds leading gains.

Investor allocations remained concentrated among the largest firms. Managers overseeing more than $5 billion in assets attracted $32.2 billion of the quarter’s inflows. Mid-sized managers drew $590 million, while smaller firms gained $880 million.

“The hedge fund industry has experienced historic growth and performance in recent months, with total assets surging to the verge of a $5 trillion milestone to end the third quarter. 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,” stated Kenneth J. Heinz, president of HFR. “While risk-on sentiment has dominated recent months, risks have also evolved, with managers participating in acceleration of these trends through year end while also positioning for sentiment and trend reversals across equities, commodities, currencies and cryptocurrencies. Institutions seeking to strategically position for these trends are likely to increase allocations to managers which have demonstrated their ability to navigate both the recent risk-on trends and volatile reversals, with allocations set to drive industry growth beyond the $5 trillion milestone into year end.”