The hedge fund industry entered the second half of 2025 with notable momentum, posting an impressive 8.3% weighted average return in Q2 and 11% YTD, according to data from Citco.
The standout among strategies? Multi-strategy hedge funds. Posting a remarkable 9.8% gain in Q2 and 13.9% YTD, these funds have leveraged their ability to dynamically allocate across asset classes. Their flexibility has enabled them to profit from equity rebounds, credit spreads, and macro dislocations in today’s volatile, data-driven environment.
Equity long/short strategies also enjoyed a strong quarter, returning 9.2%, buoyed by renewed investor risk appetite and improved alpha capture. But not all segments of the industry thrived.
Commodities-focused funds, for example, fell 3.6% in Q2 and remain just above water for the year. Event-driven funds, traditionally reliant on M&A and corporate catalysts, have lagged as deal flow remains tepid and harder to monetize.
The dispersion in returns is widening dramatically. Funds managing over $3 billion in assets averaged a 10.4% Q2 return (14.5% YTD), while smaller funds under $200 million returned only 2.5% in Q2. This growing gap, now exceeding 20%, reflects the increasing complexity of the hedge funds.
Scale, talent, and infrastructure are playing a larger role in driving returns.
Another notable trend: trading activity surged in Q2, with April and June seeing record volumes. This reflects both opportunistic repositioning and the re-emergence of high-frequency and systematic strategies. Investors are cautiously rotating back into risk assets, driven by improving market momentum but tempered by macro uncertainty.
While hedge funds have now posted 11 consecutive quarters of gains, a testament to their resilience, the path forward remains complex. Regulatory changes, sector volatility, and persistent geopolitical risks will continue to challenge consistency.
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