Hedge funds delivered their strongest monthly performance in more than a year in June, driven by sharp gains in equity hedge and event-driven strategies, according to the latest data released by hedge fund research and analysis specialist HFR.
The HFRI Fund Weighted Composite Index rose 2.4% last month—its best showing since December 2023—capping a dramatic rebound in Q2 2025. The rally was led by the HFRI Equity Hedge (Total) Index, which climbed 3.4%, and the HFRI Event-Driven (Total) Index, up 3.2%. This performance followed a volatile April marked by geopolitical stress and trade uncertainty, which gave way to improving market conditions after the passage of US tax and spending legislation and progress in global trade negotiations under the Trump administration.
The HFRI Multi-Manager/Pod Shop Index gained 1.2% in June, while the HFRI Asset Weighted Composite Index—which weights funds by AUM rather than equally—added 1.6%. HFR also introduced two new asset-weighted indices in June: the HFRI Asset Weighted Composite (ISW) and EWS, which returned 1.9% and 1.8% respectively.
The number of new hedge fund launches rose to 121 in Q1 2025—the highest since Q1 2024—while fund closures declined to 73. Total industry assets climbed to a record $4.5 trillion, reflecting strong investor interest in actively managed strategies capable of navigating economic and geopolitical uncertainty.
Dispersion among fund returns narrowed in June, with top-decile performers in the HFRI FWC gaining an average of 10.0%, while the bottom decile fell by 2.6%, down from a 15.4% spread in May. Over the trailing 12 months, top-decile funds are up 40.5%, while the bottom decile lost 22.6%. Around 80% of hedge funds delivered positive returns in June.
Equity Hedge strategies led the field, particularly in technology and growth sectors. The HFRI EH: Technology Index surged 7.1%, followed by Fundamental Growth (+4.7%) and Energy/Basic Materials (+3.7%). Overall, the Equity Hedge sector jumped 7.7% for Q2.
Event-Driven strategies also performed well, gaining 6.0% over May and June. The HFRI ED: Special Situations Index returned 5.2% in June, while Multi-Strategy funds gained 4.6%.
Macro strategies reversed earlier losses, as the HFRI Macro (Total) Index rose 1.3% in June. Gains were driven by Discretionary Thematic (+2.5%) and Commodity (+1.6%) sub-strategies.
Relative Value funds also advanced, aided by easing interest rates. The HFRI Relative Value (Total) Index returned 0.8%, with the RV: Multi-Strategy Index and RV: Corporate Index rising 1.3% and 1.0%, respectively.
Liquid alternative UCITS funds posted gains as well. The HFRX Market Directional Index added 2.72%, and the HFRX Global Hedge Fund Index climbed 1.10%, led by the HFRX Equity Hedge Index at 1.43%.
Fee structures remained stable, with average management fees holding at 1.34% and incentive fees dipping slightly to 15.80%.
“Hedge funds posted strong gains to conclude the second quarter, accelerating with strong momentum through mid-year. The robust 2Q performance occurred against a backdrop of dramatically shifting drivers that began clouded by policy uncertainty, geopolitical risk, trade/tariff volatility, all of which evolved into significant policy clarity over the quarter stemming from passage of legislation and improving economic outlook,” said Kenneth J Heinz, President of HFR.
“Hedge fund launches have increased while liquidations have fallen to historic lows with total industry assets at record highs, underscoring the strength and robustness of the value proposition for institutional investors. It is likely that this industry strength not only extends but accelerates through 2H25 and that, regardless of the prevailing volatility paradigm or investor risk sentiment, institutional investors will increase allocations to funds which have demonstrated success and the veracity of their strategies in recent months.”
