Global hedge funds managed to navigate geopolitical uncertainty and market shocks to tech stocks to begin 2025 with net gains.
Various indices from Hedge Fund Research (HFR) all showed gains in January – the HFRI Fund Weighted Composite gained 1.4%, led by the 2.1% gain for the HFRI Equity Index.
These gains came amid a highly volatile political environment with the inauguration of Donald Trump as US president and a flurry of dramatic executive orders that signalled stark changes in policy in areas such as immigration, trade, energy and federal spending.
January also saw one of the most volatile days in US stock market history when investors dumped billions-worth of tech stocks when China’s DeepSeek AI software was launched.
There were also gains of 0.36% for the HFR Cryptocurrency index, buoyed by the prospect of favourable policy changes for the crypto sector from the Trump administration.
“Despite the volatility, directional equity hedge strategies led broad-based strategy gains for the month, with contributions from fundamental, quantitative and shareholder activist sub-strategy exposures,” said Kenneth J. Heinz, HFR president.
“Managers have been positioning for this dynamic environment for several months, with intensive positioning since the US election in November, and it is likely that managers are positioned for acceleration of these policy changes throughout 1H25,” said Heinz
“Investors are likely to increase allocations to managers which have effectively demonstrated their strategy’s specialized ability to navigate these policy changes and rapidly shifting market cycles which create both risk and opportunities,” added Heinz.
