Currency Hedge Funds Strong in July

The latest monthly data from hedge fund analytics and analysis firm HFR indicates that currency funds did particularly well in July, amidst continued steady overall industry performance.

The HFRI Macro: Currency Index rose 4.54% in July, dragging the index comfortably into the black at +4.18% year-to-date. This was not enough for the headline HFRI Macro (Total) Index to provide a positive return, it was -0.1% (for -1.32% year-to-date), thanks to declines in the multi-strategy and discretionary areas.

For the first time in some time, systematic accounts outperformed discretionary in the Macro space, The HFRI Macro: Systematic Directional Index was +0.5%, while its discretionary equivalent was -0.69%. Year-to-date, the gulf between the two remains significant, however, with the HFRI Macro: Discretionary Directional Index sitting at +6.64% year-to-date, while the systematic counterpart remains deep in the red at -7.4%.

Trend followers were flat in July, meaning they remain at -4.48% year-to-date.

The headline Fund Weighted Composite Index rose 0.84% in July, helped by Event-Driven and Equity Hedge strategies. This brings the index to +4.75% year-to-date – the asset-weighted composite index advanced 0.6% for +3.2% year-to-date.

Good performance from cryptocurrencies helped the HFR Cryptocurrency Index, which surged +14.45% in July, while the HFRI Multi-Manager/Pod Shop Index added +0.1%, with positive contributions from equity, event-driven, and fixed income exposures. Year-to-date the crypto index has returned to the black, albeit at just +2.49%, while the Multi-Manager/Pod Shop Index is +4.41% for 2025.

Hedge fund performance dispersion contracted in July, as the top decile of the HFRI FWC constituents advanced by an average of +6.7%, while the bottom decile fell by an average of -4.6%, representing a top/bottom dispersion of 11.3% for the month. The dispersion in June was 12.3% and in the trailing 12 months ending July 2025, it was 58.5%. HFR says approximately 70% of hedge funds produced positive performance in July.

“Hedge funds posted a strong start to the second half of the year, accelerating the powerful performance trend to conclude the second quarter, and building on strong institutional demand and asset growth in the first half,” says Kenneth Heinz, president of HFR. “July gains were extended across nearly all strategies – crypto, event driven, equities, activist, fixed income, multi-strategy/pod shops – with these benefitting from increased and near-term clarity on trade/tariff negotiations, expectations for interest rate reductions, and an improved global economic outlook into the second half.

“With equity markets at record highs, while risk-on sentiment has dominated the past two-and-a-half months supporting gains across both hedge funds and long biased benchmarks, significant risks remain in an evolved capacity, with the potential for reversals and volatility as geopolitical policy changes are discounted into global financial markets,” he adds. “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 but also maintaining the tactical flexibility to quickly react to dynamic and unpredictable changes which are likely to occur in the current financial market paradigm.”