Hedge funds delivered a strong start to 2025, achieving a weighted average return of 4% in January, marking their best opening month in recent years, according to Citco’s latest hedge fund report.
The data, covering funds with over $2 trillion in assets under administration (AUA), showed that 77% of hedge funds recorded positive returns. Equity strategy funds led the way with 4.6%, followed by multi-strategy funds (4.3%) and commodity funds (2.4%). Only event-driven funds saw losses, with an average return of -1.1%.
Performance was driven by larger hedge funds, with funds over $3 billion in AUA posting 5.2% returns, while those in the $1 billion-$3 billion category returned 1.5%. The return spread—the gap between the 90th and 10th percentile fund performances—widened to 8.5%, up from 7.6% in December.
Hedge funds also experienced positive capital flows, recording $1.5 billion in net inflows in January. Subscriptions reached $10.2 billion, outpacing redemptions of $8.7 billion. Europe led with $1.4 billion in net inflows, followed by Asia with $0.3 billion, while the Americas saw net outflows of $0.2 billion.
“Hedge funds had one of their strongest starts to a year this decade,” stated Citco. “Strong performance across equity and multi-strategy funds, alongside robust investor inflows, set an optimistic tone for 2025.”Multi-strategy funds were a key driver of investor activity, attracting $4.8 billion in subscriptions against $3.5 billion in redemptions, resulting in $1.4 billion in net inflows. Global macro funds followed, with $0.6 billion in net inflows, while arbitrage and fund of funds strategies also saw positive contributions.
On an AUA basis, mid-sized funds performed best, with funds between $5 billion and $10 billion seeing the highest net inflows at $2.7 billion. In contrast, funds with more than $10 billion in AUA had net outflows of $0.3 billion, while those under $1 billion recorded net outflows of $1.4 billion.Treasury payments also hit record levels, with Citco processing 53,765 transactions in January, the highest number for the month in history and the third-highest overall.
