The global hedge fund industry has reported a 12.6% annual return in 2025, marking the highest since the global financial crisis.
Stock-picking strategies that bet both long and short on equity markets, along with macro managers who utilize stocks, bonds, commodities, and currencies to trade macroeconomic themes, were the primary drivers of this impressive performance.
According to data from Hedge Fund Research (HFR) and as quoted by CNBC, both these strategies saw an increase of over 17% for the year.
The HFR’s main Fund Weighted Composite Index advanced 1.56% in December, marking the strongest annual gain since 2009. HFR President Kenneth Heinz attributed this success to a buoyant stock market driven by AI and technology and infrastructure spend.
Healthcare-focused equity hedge funds ended the year with a 33.8% rise, while those focused on energy and basic materials saw a 23.4% increase. The only strategy type to finish in the red was quantitative diversified funds, which ended 2025 down 0.65%.
Edgar Allen, founder and chief investment officer of High Ground Investment Management, told the outlet that his fund performed well from both long positions and short wagers. Citadel’s flagship multi-strategy Wellington fund rose 10.2% in 2025, while AQR Capital’s Apex multi-strategy vehicle saw a 19.6% rise for the year.
Why It Matters
This significant annual return is a clear indicator of the resilience and adaptability of the hedge fund industry in the face of economic uncertainties. The diverse strategies employed by the funds, ranging from long and short bets on equity markets to macroeconomic theme trading, have proven effective in driving growth.
Furthermore, the strong performance of healthcare-focused equity hedge funds and those focusing on energy and basic materials underscores the potential of these sectors in contributing to the overall growth of the hedge fund industry. However, the decline in quantitative diversified funds serves as a reminder of the risks associated with such strategies.
The success of the hedge fund industry in 2025 sets a positive tone for the coming years, with potential for continued growth and innovation in investment strategies.
Image: Shutterstock/Shark9208888
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