Q2 2016 Hedge Fund Industry Data
The second quarter of 2016 was defined by the historic and unexpected "Brexit" vote. Despite the massive overnight shock to global markets generated by the UK voting to leave the European Union, the hedge fund industry proved resilient. Qualifying Hedge Fund NAV stabilized and grew by 1.5% to $2.690 trillion, supported by a rapid post-Brexit market recovery and rallying commodity prices.
Key findings this quarter:
- 1Qualifying Hedge Fund NAV rebounded, growing 1.5% to $2.690 trillion.
- 2Systemic infrastructure absorbed the historic post-Brexit volatility without critical failure.
- 3Commodity stabilization provided strong tailwinds for distressed debt and energy-focused funds.
- 4Estimated Gross Notional Exposure saw a modest increase of 1.9% to $15.8 trillion.
Macro Environment
Late June brought the Brexit shock, which triggered a historic plunge in the British Pound and a massive spike in global volatility. However, the selloff was remarkably short-lived; global central banks signaled readiness to provide liquidity, and markets largely recovered within days. Earlier in the quarter, stabilizing oil prices had fueled a strong rally in emerging markets and high-yield credit.
Regulatory Context
The Brexit vote tested the plumbing of the global financial system. The OFR closely monitored the performance of central clearinghouses and bilateral margin requirements during the intense overnight volatility. Counterparty credit risk functioned largely as designed, with no major systemic hedge fund failures reported despite extreme currency moves.
Future Outlook
Following the Brexit resilience, funds positioned themselves cautiously ahead of the highly contentious U.S. Presidential election. While markets had broadly recovered, the underlying geopolitical environment remained deeply fractured, encouraging macro funds to retain elevated cash buffers.
What moved most this quarter
Qualifying Hedge Funds Net Assets
Significant quarter-over-quarter change based on OFR Form PF data.
Estimated Gross Notional Exposure
Significant quarter-over-quarter change based on OFR Form PF data.
Industry Size
Qualifying Hedge Funds Net Assets
Net assets rebounded by 1.51%, finishing Q2 at $2.690 trillion.
Leverage
Estimated Gross Notional Exposure
Gross notional exposure grew modestly by 1.9% to $15.8 trillion.
Complete Metric Changes
| Metric | Prior Q | Current Q | Change |
|---|---|---|---|
| Qualifying Hedge Funds Net Assets | 2,650 | 2,690 | +1.51% |
| Estimated Gross Notional Exposure | 15,500 | 15,800 | +1.94% |
Frequently Asked Questions
How did the Brexit vote affect hedge funds?
The unexpected Brexit vote caused severe short-term volatility, particularly in currency markets, but aggressive central bank messaging sparked a rapid recovery, allowing funds to post positive quarterly NAV growth.
What was the Q2 2016 NAV for Qualifying Hedge Funds?
NAV rebounded by 1.5% to reach $2.690 trillion.
Did leverage materially increase?
Gross notional exposure grew modestly to $15.8 trillion as funds cautiously redeployed capital late in the quarter.
Methodology & Source Notes
Data is sourced from the definitive OFR Form PF aggregated releases. Comparisons are made quarter-over-quarter. All financial values are estimates based on aggregated filings and subject to reporting lags.
Data Provider: U.S. Office of Financial Research Hedge Fund Monitor. We fetch the latest publicly available aggregated data releases representing SEC Form PF submissions.
Reported values can be subject to revision by the OFR in subsequent quarters. We update historical tables to reflect these revisions where available. This analysis is provided for informational and educational purposes only and does not constitute investment advice.
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