Who Benefits From Hedge Funds?

The hedge fund and alternative investment industry is a critical component of the financial system and has a proven track record of creating economic growth and opportunities. Hedge funds offer investors access to investment strategies that diversify their portfolios, manage risk, and deliver superior returns over time.

Hedge Funds Deliver for Retirees and Non-Profits

In all 50 states, institutional investors including pensions, university endowments, and non-profits rely on hedge fund allocations to help support retirement security, higher education, and the important work done by foundations and charities.

In the U.S. alone, these institutions invest more than $1.5 Trillion in hedge funds.

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$895 Bn

Invested in Hedge Funds by Pensions

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$522 Bn

Invested by Non-Profits, Foundations, and Endowments

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$132 Bn

Invested by Colleges & Universities

Hedge Fund Fast Facts

Hedge funds help institutions:

Protect retirement security for more than 26 million American workers.

Fund college education for thousands of students at more than 300 colleges and universities.

Support life-changing work in communities through investments from nearly 1,000 non-profits and foundations.

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What are hedge funds?

Hedge funds offer investors access to investment strategies that diversify their portfolios 

hedge fund is a pool of money that investors delegate to be invested by a professional investment manager. Hedge funds only accept capital from qualified investors, including institutions such as pensions, non-profits, and university endowments, and allocations in hedge funds fill an important and irreplicable role in their portfolios. 

There are more than twenty major hedge fund strategies that use varying methods to achieve alpha, that is, investment returns that are uncorrelated to traditional market indexes, such as the S&P 500. For many of these strategies, passive options do not exist.  

Because of their low correlation to traditional market benchmarks, hedge funds are used by institutions to diversify their portfolios, manage risk, and deliver superior returns over time.  

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Why are hedge funds important to the economy?

Hedge funds play a critical role in the economy and financial markets 

Hedge funds are an essential component of the U.S. economy and the global financial ecosystem – collectively managing more than $3.6 trillion in assets. The industry creates value for investors and helps to promote economic growth and opportunities by growing and protecting retiree benefits, university endowments, and assets of charitable organizations 

The industry also provides capital for companies on the cutting edge of research and innovation. Hedge funds are used by investors to navigate all market conditions, outperforming the S&P 500 index by nearly 10% during market turmoil in the first quarter of 2020When public equities were down 38% in 2008, hedge funds were down an average of 18%. Additionally, from 2009-2019, hedge funds were nearly 60% less volatile than the S&P 500 index. 

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Who benefits from hedge funds?

Hedge funds may work on Wall Street, but they benefit Main Street

Not all Americans will invest directly with hedge funds – but many will still benefit from hedge fund investments. Through nearly $900 billion in pension investments, hedge funds help ensure retirement security for more than 26 million American workers. Non-profits and foundations also rely on hedge funds to deliver reliable returns that fund their mission-driven work.

About MFA

MFA represents global alternative investment industry and its investors by advocating for public policies that foster efficient, transparent, fair capital markets, and competitive tax and regulatory structures.

MFA supports member business strategy and growth via proprietary access to subject matter experts, peer-to-peer networking, and best practices. MFA’s more than 140 member firms collectively manage nearly $1.6 trillion across a diverse group of investment strategies.

Member firms help pension plans, university endowments, charitable foundations, and other institutional investors to diversify their investments, manage risk, and generate attractive returns over time.

MFA has a global presence and is active in Washington, London, Brussels, and Asia, supporting a global policy environment that fosters growth in the alternative investment industry.