Currency, Discretionary Funds, Counter Macro Dip in May

While the broader hedge fund industry performed well in May, the Macro sector struggled and compounded its 2025 woes, although there were positive returns from currency and discretionary funds, according to indexation and analytics firm HFR.

The HFRI Fund Weighted Composite (FWC) Index rose 1.99% in May, HFR says, largely driven by strong returns from Event-Driven (+3.81%) and Equity Hedge (+3.68%) funds. Crypto funds were also up, unsurprisingly, following the sector’s resurgence during the month. The strong performance managed to drag the FWC Index back into the black, at +1.28% year-to-date.

Macro funds continued to struggle, however, the HFRI Macro (Total) Index dropping 1.01% in May, bringing year-to-date performance to -3.18%. Only the HFRI Currency Index at +0.24%, the Macro Discretionary Thematic Index, at +1.22% and the Macro Discretionary Directional Index at +0.16% were in the black as far as sub-strategies go – along with the Macro Multi-Strategy Index (-0.15% in May but +2.08% year-to-date), these are the only Macro indices in positive territory. Currency traders are +0.1%, the Discretionary Thematic Index is +5.59% and the Discretionary Directional Index is +4.87%.

As has been the case for some time now since volatility spiked, systematic funds are losing out. The Systematic Diversified Index dropped 1.8% (-8.86% year-to-date); the Systematic Directional Index dropped 1.75% (-8.76%); and the Trend Following Directional Index dropped 1.32% (-5.72%(.

Unsurprisingly, given the quieter nature of markets in May, the recently-launched HFRI Long Volatility Index dropped in May, by 2.49%, but is still up 4.39% year-to-date. Also recently-launched, the HFRI Multi-Manager/Pod Shop Index rose 1% in May, for +3.47% year-to-date.

Performance dispersion contracted in May, as the top decile of the HFRI FWC constituents advanced by an average of +10.6%, while the bottom decile fell by an average of -4.6%, representing a top/bottom dispersion of 15.2%. In April this was 17.0%. HFR says approximately 70% of hedge funds were in positive territory in May.

“Hedge funds posted strong gains in May, led by Directional and cryptocurrency strategies, as volatility subsided from the April spike and technology equities led global gains on progress in tariff negotiations and improved global economic outlook for H2,” says Kenneth Heinz, president of HFR. “Opportunistic positioning quickly transitioned from defensive portfolio protection to targeted and concentrated exposures positioned for equity market improvement and recovery.

“While overall geopolitical and inflation risks have fallen from 2024 levels, these risks have also evolved and shifted to include legislative uncertainty, tension over US government spending/borrowing, and uncertainty regarding continued efforts to resolve ongoing and potential military conflicts,” he continues. “Despite recent gains, funds remained tactically positioned for fluid, rapid changes to the financial market cycle. As such, institutional investors interested in the opportunistic exposure to these rapidly evolving risks and opportunities are likely to increase allocations to funds which have demonstrated their strategy’s robustness through recent volatility, accelerating industry growth in H225.”