Hedge fund assets hit a record last year as the industry delivered its best performance in more than a decade during the most tumultuous year for markets since the 2008 financial crisis.

Assets surged $290bn during the final three months of the year, marking the biggest-ever quarterly jump and bringing total assets under management to a record $3.6tn, according to data provider HFRI.

Against a backdrop of rising markets, strong performance helped to boost hedge fund assets. The HFRI Fund Weighted Composite index, which tracks a range of strategies, gained 11.6 per cent in 2020, its best return since 2009. Meanwhile, investors ploughed a net $16bn into the industry during the second half of the year, HFRI said.

The strong returns and inflows come as a source of relief for an industry that has struggled to justify its place in investor portfolios following years of lacklustre performance while charging high fees.

Over the past decade, hedge funds have been forced to compete with the emergence of much cheaper tracker funds and a growing interest in other so-called alternatives strategies such as private equity and private debt. In conversations with their investors, managers insisted that they were handicapped by the longest bull run in history and record-low interest rates but would outperform during a downturn.

The benchmark S&P 500 still beat the average hedge fund last year, returning 18.4 per cent. The robust stock market recovery helped equity-focused funds outperform other strategies and exceed $1tn in assets.

While hedge funds on the whole delivered strong returns, the coronavirus crisis wrongfooted some of the industry’s biggest players.

Renaissance Technologies, the secretive hedge fund founded by Jim Simons, had one of its worst years. Its Institutional Equities Fund lost close to 20 per cent, while its Institutional Diversified Alpha declined by 31 per cent, investors said. The fund’s assets dropped by $15bn to $60bn, according to people close to the firm, due partly to outflows.

Bridgewater Associates, another stalwart of the industry, also had a difficult year, though it managed to claw back some of its losses during the second half of 2020. Its flagship Pure Alpha fund was down more than 10 per cent at the end of December.