Hedge funds hit £1 trillion in capital as leverage falls

THE combined value of the global hedge fund industry has hit a record $2.02 trillion (£1.2 trillion), according to Hedge Fund Research (HFR).

Investors have flocked to the vehicles to place assets due to above-inflation returns during a time of low interest rates and uncertain markets.

Hedge funds typically offer investors inflation-protected performance, having outperformed benchmakers of inflation since 1990.

The investment vehicles have performed in a similar way to the rising price of commodities, which have surged in recent years.

Meanwhile, hedge fund industry leverage was found to have declined in the last 12 months, according to HFR.

Average standard leverage decreased across all hedge fund strategies from 1.27 to 1.10 times investment capital. The percentage of funds which do not typically use leverage rose to approximately one third of all funds, up four per cent compared to last year.