Hedge funds kicked off the second half of 2025 on a positive note, building on strong first-half gains as improving sentiment around M&A activity, global trade negotiations and the economic outlook fuelled risk-on positioning across a range of strategies, according to a data from HFR.
The HFRI Fund Weighted Composite Index rose an estimated 0.8% in July, while the asset-weighted composite advanced 0.6%. Performance leadership came from event-driven and equity hedge strategies, with particularly strong showings in activist campaigns, healthcare and technology exposures.
Event-driven funds – often positioned in deep-value situations and M&A plays – jumped 1.5% for the month, extending their three-month run to +6.6%. Activist managers led the way with a 4.0% gain, while multi-strategy event-driven funds added 1.8%.
Equity hedge strategies climbed 1.2% in July, bolstered by healthcare specialists (+4.8%), fundamental growth managers (+1.3%) and market neutral funds (+1.0%). Technology-focused equity hedge funds added 0.5%. Year-to-date, equity hedge leads all major strategy groups with a 7.25% return.
Outside traditional equity plays, the HFR Cryptocurrency Index surged 14.5% in July, while multi-manager/pod shops delivered a modest 0.1% gain.
Relative value managers also posted gains, with the convertible arbitrage sub-index up 1.85% and corporate credit-focused funds ahead 1.2%, despite rising bond yields and a steady Fed policy stance.
Macro strategies were more mixed, with the HFRI Macro (Total) Index dipping 0.1%, reflecting declines in multi-strategy macro funds offset by small gains in systematic diversified approaches.
HFR president Kenneth J Heinz said July’s performance extended the “powerful trend” seen in Q2, citing institutional demand, record equity markets and improved economic clarity as tailwinds — though he cautioned that “significant risks remain” from potential reversals and geopolitical policy shifts.
“Forward looking institutional investors are likely to accelerate the capital growth trend from the first half of the year by allocating to strategies opportunistically positioned to participate in additional market gains whilst at the same time retaining the tactical flexibility to quickly react to dynamic and unpredictable changes which are likely to occur in the current financial market paradigm,” Heinz noted.
