Hedge Funds Suffer in July

Hedge funds suffered in July, largely thanks to tech and AI-related equity market woes, according to indexation and analytics firm HFR, with only Relative Value strategies providing positive returns and just 45% of funds in the indices making money.

The headline HFRI Fund Weighted Composite Index was -1.1% for the month, largely thanks to a 1.85% decline in the Equity Hedge (Total) Index, which remains +7.44% year-to-date, and a 1.77% drop for Event Driven strategies, which are now +5.2% for the year. The HFRI Relative Value (Total) Index, by contrast was +0.24% for the month, leaving it +3.99% year-to-date. Year-to-date the headline index remains healthily up at +6.25%.

The HFRA Macro (Total) Index was also down, albeit slightly, at -0.34%, bringing year-to-date returns to +5.88%. Only the Commodity and Multi-Strategy sub-indices were in the black in July, by 2.18% and 0.43% respectively. The HFRI Macro Currency Index was -0.12% in July and remains the only Macro sub-index in the red for 2026 at -2.85%.

Both systematic and discretionary traders suffered alike – the Systematic Directional Index was -0.9%, while the Discretionary Directional Index was -0.87%. Year-to-date, the former is outperforming the latter +8.23% to +4.34%. The HFRIA Macro Systematic Diversified Index is best performing sub-index in the Macro family at +8.37%, this after it dropped 0.94% in July.

It was a slightly better month for crypto funds, with the HFRI Blockchain Composite Index managing to return 2.24%, however the index remains mired in the red at -13.47% year-to-date. The Cryptocurrency Index was +2.38%, but is -13.1% year-on-date.

Performance dispersion expanded in July, as the top decile of the HFRI FWC constituents advanced by an average of +7.6%, while the bottom decile of constituents fell by an average of -12.5%, representing a top/bottom dispersion of 20.1%. This compares to 16.7% in June and 79.1% for the trailing 12-month period. 

“Hedge funds navigated an extremely intense and volatile trading environment, with exposure to negative technology momentum contributing to the largest decline for technology hedge funds since 2008,” says Kenneth Heinz, president of HFR. “The macroeconomic outlook for H2 presents a mixed picture for broader financial markets, with investors facing an ever more complex landscape shaped by evolving AI expectations, geopolitical risk, supply chain pressures, interest rate uncertainty, and shifting political dynamics. These are conditions in which the most agile and experienced hedge fund managers are likely to differentiate themselves and lead industry gains.”