(HedgeCo.Net) Hedge funds are starting the year with a pronounced performance narrative—double-digit gains in 2025 that have institutional investors rethinking active management, yet a performance divide remains across managers and strategies. A flurry of new data released today shows that leading players delivered strong returns driven by market trends, while some legacy macro houses tightened belts amid intensified competition and shifting market forces.
Industry Returns: Goldman Sachs Confirms Double-Digit Gains
A Goldman Sachs report released today highlights that hedge funds delivered double-digit average returns across 2025, underscoring how active strategies navigated volatility better than many passive benchmarks.
Stock-picking hedge funds posted a 16.24% average return, nearly tracking the S&P 500’s 16.4% performance—an exceptionally rare outcome for hedge funds historically, which often lag in strong beta environments. The gains were broad-based but accentuated in healthcare and certain systematic strategies. Reuters
Three major takeaways from Goldman’s findings:
- Healthcare-focused strategies led performance at +27.2%, outperforming technology-heavy strategies. Reuters
- Sequential monthly gains across multi-manager funds extended a positive performance streak as 2025 closed out. Reuters
- Gross leverage expanded sharply, suggesting bets on volatility and dispersion were profitable. Reuters
For allocators, this evidence reinforces the idea that active, position-specific insights still provide diversification benefits, even in strong equity rallies.
Winners, Laggards, and Industry Narratives
Today’s HedgeCo.Net industry report synthesizes the 2025 “performance report card” and highlights a striking pattern:
- Macro and long/short equity funds outperformed multi-strategies in many cases.
- Smaller and mid-sized funds posted some of the best individual returns of the year.
- Industry volatility—driven by geopolitical tensions and tariff uncertainties—boosted select funds that actively traded cross-asset price dislocations. HedgeCo.net
Bridgewater Associates’ Pure Alpha fund and other standout macro operations benefited disproportionately from these conditions, while some multi-strategy giants delivered respectable but less spectacular gains by comparison.
Legacy Macro Forces: Brevan Howard’s Profit Decline
In stark contrast to many peers, Brevan Howard reported a 20% drop in revenue and profit, marking one of its weakest years in recent times. The firm’s flagship Master fund returned only 0.75% in 2025, illustrating the risks of crowded macro positioning and slower trade execution in highly correlated markets. Financial Times
Key implications for the broader hedge fund landscape:
- Larger macro players are facing pressure from aggressive alpha seekers with nimble risk systems.
- Investors are scrutinizing structural cost discipline more than performance in isolation.
- Strategic relocation of leadership and personnel—e.g., co-founder shifts to Switzerland—underscores tax and regulatory considerations influencing where hedge funds choose to base operations. F N London
Strategic Shift: Looking Toward 2026
Industry asset growth also hit a milestone: global hedge fund assets grew by roughly $628 billion in 2025, pushing total industry capital past $5 trillion for the first time. This surge reflects broad investor preference shifts away from private equity and into more liquid alpha-seeking alternatives. Financial Times Moreover, the current environment continues to favor dispersion-based strategies, with elevated single-stock volatility providing fertile ground for long/short and macro approaches throughout 2026.