The biggest hedge fund gains in a decade still fell far behind U.S. stock returns last year. 

Hedge funds added 10.4 percent in 2019, their best performance since 2009, when markets were climbing out of the global financial crisis, according to a Hedge Fund Research report this week. The industry, which managed about $1.6 trillion of assets in 2009, gained 20 percent that year.


“Hedge funds posted the highest annual performance since the financial crisis recovery, as powerful risk-on sentiment dominated not only December, but most of 2019,” said Kenneth Heinz, president of HFR, in a statement on the report. “Risk parity and the highest beta strategies” led the industry’s gains last year.


Equity hedge strategies drove the performance, fueled by optimism over trade and the U.S economy, according to HFR. Still, this wasn’t enough to beat major stock indexes, with the S&P 500 soaring 28.9 percent in 2019.


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The HFRI Equity Hedge (Total) Index was up 13.9 percent last year, with exposures to healthcare and technology pushing the category’s best result since 2013, according to HFR. Fixed income, commodities, and currencies helped industry performance, as well, Heinz pointed out. “Global financial markets experienced a correlated melt up in 2019,” he said.

Uncorrelated macro strategies, meanwhile, added 6.2 percent for the year. The HFRI Macro (Total) Index lost 0.5 percent during the final three months of 2019, the only quarter in which the measure tumbled last year.


At the end of September, macro assets totaled $599.5 billion, a record level even after outflows during the first three quarters of 2019, according to HFR. That compares with $289 billion at the end of 2009.

The hedge fund industry managed $3.24 trillion in total at the end of September, hovering near the record level seen a year earlier. Heinz expects assets to rise again next year, noting that the U.S economy and employment remains strong.


“The 2020 outlook reflects positive but tempered expectations as a result of rising geopolitical risks and increasing conflict in the Middle East, continuation of trade tariff negotiations, and the uncertainty of the U.S election,” he said. “Funds positioned for this dynamic, global, opportunity-rich environment are likely to lead industry performance and growth in 2020.”