Hedge funds turned in their strongest annual showing in more than a decade, posting double-digit gains in 2025 as performance improved across most investment strategies, according to data from Hedge Fund Research (HFR).
The industry generated an average return of 12.6% for the year, marking its best result since 2009, when hedge funds surged close to 20% in the wake of the Global Financial Crisis.
Equity long/short strategies and macro-focused managers were among the top performers, each delivering gains of more than 17% over the year. The HFR Fund Weighted Composite Index rose 1.56% in December, rounding off an exceptionally strong 12 months.
Sector-focused equity hedge funds stood out, led by healthcare specialists, which posted returns of 33.8%. Funds targeting energy and basic materials also had a strong year, advancing 23.4%. These managers benefited from themes such as drug pricing dynamics, the surge in weight-loss treatments boosting pharmaceutical stocks, and sustained strength in gold and silver markets.
Large hedge fund groups also reported solid performance. Citadel’s flagship Wellington fund gained 10.2% in 2025, while AQR Capital’s Apex multi-strategy fund delivered a 19.6% return.
Quantitative diversified strategies were the only segment to end the year in the red, declining 0.65%. These systematic funds struggled amid sharp market swings, including an April spike in volatility linked to tariffs and a sell-off in technology stocks in November.