Hedge funds have historically performed better when a Democrat is in the White House, according to a report by Reuters citing data released on Tuesday by research firm Hedge Fund Research (HFR), as US voters headed to the polls.
On average, hedge funds delivered a 10.2% annualised return under Democratic presidents, compared to an 8.7% return under Republicans, based on HFR’s main index, which tracks global hedge fund performance. The findings are drawn from the HFRI Fund Weighted Composite Index, which measured hedge fund returns across presidential terms from 1990 to 2024.
Performance was also influenced by Congress’s composition, with hedge funds tending to perform about twice as well when a single party controlled both the House and Senate, as opposed to when control was split. Returns were highest when Democrats held a congressional majority, HFR’s data revealed.
By strategy, equity-focused hedge funds saw the strongest returns under Democratic administrations, averaging 12.7% compared to 9.6% under Republicans over the last 34 years. Hedge funds specialising in mergers and acquisitions or relative value trading also showed higher returns during Democratic presidencies.
The only exception to the trend was macro hedge funds—those trading based on economic factors—which performed better under Republican presidents, according to HFR.
The data also highlighted that performance dispersion, or the gap between top-performing and worst-performing hedge funds, was widest during Democratic presidencies.
Returns were typically strongest in the first year of a president’s term and tended to dip in the second, sixth, and final years of two-term presidencies.
Excluding the 2008 financial crisis from the analysis slightly shifted the advantage, with hedge funds returning 10.7% under Republican presidents and 10.2% under Democrats during these periods, HFR noted.
