Hedge fund assets reached an all-time high of $4.5tn in October, driven by strong performance across several investment strategies, and underpinned by a 7.4% YTD return in the HFRI Fund Weighted Composite Index, according to a report by Wells Fargo analysts.

Equity hedge funds led the charge with a 9.6% gain year-to-date, attributed to successful stock selection and increased exposure to public markets. Analysts noted that heightened stock price dispersion — fuelled by higher interest rates and slowing economic growth — created opportunities for active management to thrive.

Event-driven strategies, meanwhile, particularly distressed credit, also saw significant gains as companies tackled recapitalisations and restructurings. Relative value long-short credit strategies capitalised on pricing dislocations in fixed-income markets, delivering steady returns with minimal correlation to broader market movements.

In contrast, macro strategies, especially systematic approaches, struggled due to frequent trend reversals across multiple asset classes. The volatile environment made it challenging for these strategies to sustain consistent gains.

Wells Fargo's analysts remain optimistic about the prospects for certain strategies, including equity hedge (directional), event-driven (distressed credit), and relative value (long/short credit). These approaches are expected to benefit from ongoing economic recovery and stabilisation in market conditions.