There were about 17,378 hedge funds in the world in 2020, according to alternatives data provider Preqin. Although the number of hedge funds has declined in recent years, and investors withdrew a net $55.4 billion from hedge funds in 2022 (according to Hedge Fund Research), total assets under management (AUM) exceeded $4.8 trillion worldwide in 2022.
A major shift in funding sources for hedge funds has occurred in the past 20 years or so. In 2001, contributions by institutional investors comprised only 5 percent of all capital at hedge funds. Preqin reports that contributions by this investor class had grown to 58 percent of industry capital in 2017 (the latest year for which data is available). “As institutional investors continue to seek diversification and absolute returns in varied market conditions, the role of hedge funds as an integral part of proper portfolio construction becomes increasingly greater,” according to professional services firm KPMG.
As of June 2023, Statista.com reported that the 10 largest hedge fund firms by assets under management in the world were:
- Field Street Capital Management
- Citadel Investment Group
- Bridgewater Associates
- Mariner Investment Group LLC
- Millennium Capital Partners
- Ares Management
- Balyasny Asset Management
- AQR Capital Management
- Point72 Asset Management
- Rokos Capital Management
Nearly 400,000 people were employed in the global hedge fund industry in 2017 (the latest year for which data was available), according to the Alternative Investment Management Association. Staff at hedge fund management firms comprised about 29 percent of this total. About 69 percent worked as lawyers, auditors, administrators, and prime brokers at businesses that provided services to hedge funds.
The industry is highly fragmented; in 2023, the five largest firms held only 9 percent of total AUM in the United States, according to Reuters. Many firms have fewer than five employees, and even the largest firms typically have only 200 to 1,000+ employees. Preqin reports that the average hedge fund management firm in the United States has 20 workers. In the United Kingdom, the average staff count is 29, compared to around 15 in Canada, Australia, France, and Brazil. Even the hedge fund firms that rank amongst the leaders in the amount of funds being managed do not have a large number of employees. For example, AQR Capital Management has only about 1,000 employees.
Hedge fund firms are located throughout the United States and the world (especially in Great Britain). Many U.S.-based firms are headquartered in New York and other cities on the East Coast, Chicago, Dallas, and Los Angeles, although firms can be found in nearly every state. Many of the top U.S. firms have offices in foreign countries. J.P. Morgan Asset Management, for example, has offices in more than 20 countries (including the United Kingdom, India, and Australia). AQR Capital Management is headquartered in Greenwich, Connecticut, but has international offices in London, United Kingdom; Munich, Germany; Hong Kong, China; Bengaluru, India; Dubai, United Arab Emirates; and Sydney, Australia.
There will continue to be good opportunities at hedge funds. One fast-growing career is financial analyst. Employment for financial and investment analysts who work for funds, trusts, and related firms is expected to grow by 23.4 percent from 2022 to 2032, according to the U.S. Department of Labor, or much faster than the average for all careers. There are also good opportunities for statisticians, information security analysts, and software developers. Employment for statisticians who work for securities, commodities, and other financial investment and related firms is expected to grow by 33.8 percent from 2022 to 2032, according to the DOL, or much faster than the average for all careers. Job opportunities for information security analysts in the finance and insurance sectors will grow by 26.5 percent during this time span. Software developers who are employed by companies that work with funds, trusts, and other financial vehicles will experience employment growth of 34.6 percent through 2032.
Women and ethnic minorities continue to be underrepresented in the hedge fund industry—especially in fund manager and other executive-level positions, as well as in ownership. In January 2023, women comprised 26.5 percent of hedge fund employees worldwide, according to alternatives data provider Preqin. This is significantly lower than their percentage in the workforce, but an increase of 7.2 percent since 2019. Their representation is lower at managerial levels. Women comprised 19.5 percent of senior hedge fund staff. While half of U.S. investment capital comes from women, only 4.3 percent of hedge fund companies were owned by women (minorities owned 8 percent of firms) in 2017, according to the Bella Research Group. Many large firms have launched diversity initiatives that aim to increase the number of women and minorities in management positions and increase the overall number of minorities who enter the field. Several organizations aim to improve diversity in the field and represent the professional interests of hedge fund workers from diverse backgrounds including 100 Women in Finance, the Association of Women in Alternative Investing, and the Association of Asian American Investment Managers. Hedge fund firms have also created women’s networking groups and other programs to improve diversity. For example, Bank of America Merrill Lynch, in partnership with GCM Grosvenor and Sponsors for Educational Opportunity, partnered with investors representing more than $300 billion in assets to host a Hedge Fund Forum on Diversity.
The U.S. hedge fund industry is regulated by the U.S. Securities & Exchange Commission and the Commodity Futures Trading Commission. The European Securities and Markets Authority regulates the European hedge fund industry. The Financial Industry Regulatory Authority is a U.S. nongovernmental organization that regulates exchange markets and brokerage firms.
Many noteworthy professional organizations serve those working in the hedge fund industry, including:
- The Alternative Investment Management Association offers certification, continuing education, and other resources to its members (hedge fund managers, fund of hedge fund managers, prime brokers, fund administrators, independent fund directors, etc.) Its membership comprises about 2,100 firms in 60+ countries. Its fund manager members collectively manage more than $2.5 trillion in hedge fund and private credit assets.
- The CFA Institute offers certification and continuing education opportunities. It has more than 190,000 members in 160 markets around the globe.
- The Chartered Alternative Investment Analyst Association provides a well-respected continuing education program and certification.
- The Hedge Fund Association is an “international not for profit industry trade and nonpartisan lobbying organization devoted to advancing transparency, development, and trust in alternative investments.”
- The International Association for Quantitative Finance offers membership for both students and professionals. Its Web site provides a lot of useful education and job-search resources.
- The Investments & Wealth Institute provides certification, continuing education, and other resources to its members, which include investment consultants and analysts, accountants, and others who provide financial services and advice to corporations, individuals, nonprofits, and retirement/pension plans.
- The Managed Funds Association is a membership organization for hedge fund managers and related professionals. Its more than 160 member firms collectively manage over $2 trillion across a diverse group of investment strategies
- The CMT Association is a nonprofit professional regulatory organization of more than 4,500 market analysis professionals in more than 135 countries. It provides certification, publications, and continuing education opportunities.
- The National Futures Association is the self-regulatory organization for the U.S. derivatives industry, including retail off-exchange foreign currency, on-exchange traded futures, and OTC derivatives (swaps).
- The Securities Industry and Financial Markets Association represents the interests of securities firms, banks, and asset managers. It also offers the following professional societies for individual members: Compliance and Legal Society and the Financial Management Society.