Hedge funds are navigating a stormy Q1, with volatility testing strategies and exposing cracks in crowded trades. Here’s the rundown as of March 13, 2025.
Tech Rout Hammers Returns: The tech-driven selloff continues to batter hedge funds, with Goldman Sachs reporting that stock pickers and multi-strategy funds surrendered half their 2025 gains in a single day last week. U.S. equity long/short funds are barely above water at 1% YTD, while multi-strategy giants like Millennium and Citadel posted lackluster February numbers—some down as much as 4.4% through early March, per Bloomberg. “TMT longs got torched,” one PM told HedgeCo.Net. “Everyone’s rethinking beta exposure.”
De-Risking Picks Up Pace: Reuters notes global hedge funds accelerated equity unwinds this week, slashing positions at a clip not seen since the COVID days. The S&P 500’s 5.3% YTD drop (Goldman data) and a Nasdaq correction have managers piling into cash and short bets, especially in healthcare and consumer stocks. “It’s a defensive crouch,” says HFR’s Sarah Kline. “Leverage is still sky-high—205% per Zerohedge posts on X—but the mood’s shifting fast.”
Macro Shines Amid Chaos: While equity strategies bleed, macro funds are stealing the spotlight. Rokos Capital Management’s 0.57% YTD gain (Reuters) and Caxton’s 7% haul (Bloomberg) prove rates and FX bets can still deliver. “Volatility’s our oxygen,” a macro trader quipped. Weather modelers are also in demand—Bloomberg reports funds like Millennium are shelling out $1 million-plus for talent to game commodities swings, from natural gas to coffee futures.
China Fade and Altcoin Pivot: Goldman Sachs flagged a fourth straight week of China equity selloffs by hedge funds, with DeepSeek’s AI buzz fizzling. Meanwhile, CoinDesk data shows crypto funds shed $4.75 billion in four weeks, though Solana and XRP inflows hint at a tactical shift. “Altcoins are the new frontier,” a ZX Squared strategist mused. “Bitcoin’s too correlated now.”
Regulatory Heat Rising: The Financial Stability Board’s new taskforce (Bloomberg) is eyeing hedge funds’ macro bets for systemic risks, and leverage levels are drawing stares. “Crowded trades plus high gearing equals a powder keg,” Kline warns. Add Trump’s tariff threats to the mix, and the Street’s bracing for more turbulence.
Bright Spots: Some funds are adapting—Triata’s 39% gain (Bloomberg) rode Chinese tech briefly, while Viking Global’s $526 million Boeing bet (Reuters) signals contrarian confidence. Secondary markets are humming too, with Preqin hinting at a distribution rebound.
The vibe? Cautious but opportunistic. Equity desks are licking wounds, macro’s flexing, and the next moves hinge on Fed signals and tariff chatter. Buckle up.
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