Hedge Funds Continue to Produce Returns

Although not at the record-setting pace of Q3, hedge funds continue to perform solidly in Q4, with November providing the fourth consecutive month of gains, according to indexation and analytics firm HFR, whose Fund Weighted Composite Index (FWC) rose 0.7% for the month.

Year-to-date the HFRI FWC is +11.1%, largely thanks to the Equity Hedge (Total) Index, which rose 1.05% in November for +15.6% year-to-date. Next best sub-index was the HFRI Macro (Total) Index, which was up 1% in November, for +5.5% year-to-date – within this, currency traders were up 0.79% for +3% year-to-date.

Following the recent pattern, while systematic funds have started performing better, they have been unable to close the substantial gap on their discretionary brethren. The HFRI Systematic Directional Index managed to slightly outperform the related Discretionary Index, by +0.84% to +0.79%, but year-to-date it remains mired in the red at -1.9%. In contrast the Discretionary Directional Index is a very healthy +14.65% thus far in 2025.

The downturn in crypto markets hit crypto hedge funds in November, the HFR Cryptocurrency Index fell 8%, nearly halving year-to-date performance to +10% and its worst monthly return since February 2025. The HFRI Multi-Manager/Pod Shop Index was +0.65%, with mixed contributions across strategy exposures, year-to-date it is +8.65%.

Performance dispersion declined slightly in November, as the top decile of the HFRI FWC constituents advanced by an average of +7.9%, while the bottom decile fell by an average of -5.0%. This represents a top/bottom dispersion of 12.9%, in October it was 13.8%, and for the trailing 12 months ending November 2025, it was 64.4%. HFR says approximately 60% of hedge funds produced positive performance in November.

“Hedge fund performance in November saw a powerful acceleration of the dominant driving trends from the latter half of October, as Equity and Macro strategies advanced in an environment of increased volatility and even shorter, dynamically shifting investor risk paradigms with these ranging from micro cycles of extreme positive and negative sentiment changing rapidly and continuously,” says Kenneth Heinz. President of HFR. “Macro, Equity, and Relative Value strategies generated gains against this backdrop, including a sharp correction in cryptocurrencies, with strong sub-strategy contributions across Commodity, Activist and Healthcare-focused funds.

“Managers have effectively navigated the increase in volatility, which has been driven in large part by the tension between positive sentiment associated with lower interest rates and continued AI growth contrasted with uncertainty and concern regarding valuation and the sustainability of AI technology spending,” he adds. “Building on the strong year of performance and capital growth, managers continue to position for a wide range of economic, financial and geopolitical scenarios and outcomes into 2026, while investors continue to position for the extension of these powerful trends but are also provisioning for the emergence of new trends as the hedge fund industry advances towards key historical milestones to begin 2026.”