Macro Gives Up Early Gains Amidst Mixed Hedge Fund Performance in February

Volatility was a double-edged sword for hedge funds in February, according to indexation and analysis firm HFR, as they posted mixed performance, with Macro funds giving up their gains in January, while Relative Value and Event Driven made gains.

The headline HFRI Fund Weighted Composite Index (FWC) was -0.47 percent for the month, but remains in the black at +0.84% after the first two months of 2025. Within this, the HFRI Macro (Total) Index was -1.47%, dragging the strategy into the red for 2025 at -0.45%. Active and discretionary traders did well as part of the broader Macro Index, but systematic and trend followers took away those gains, and then some. The HFRI Currency Index also suffered, dropping 1.92%, taking it to -0.6% year-to-date.

The HFRI Relative Value (Total) Index rose an estimated +0.8% in February, marking the 16th consecutive monthly gain and 29th gain in last 32 months, according to HFR, while the Cryptocurrency Index fell with most crypto values, dropping 16.8%.

The HFRI Multi-Manager/Pod Shop Index gained +0.92% for the month, while performance dispersion expanded in February, as the top decile of the HFRI FWC constituents advanced by an average of +6.5%, while the bottom decile fell by an average of -8.3%, representing a top/bottom dispersion of 14.8% for the month. By comparison, the top/bottom performance dispersion in January was 12.1% and in the trailing 12 months ending February 2025, the top decile of FWC constituents gained +31.2%, while the bottom decile declined -15.7%. Approximately half of hedge funds produced positive performance in February, HFR says.

“Driven by trade and tariff uncertainty, hedge funds navigated volatile equity market trends and reversals in February, with gains across Relative Value Arbitrage and Event Driven strategies, as the HFRI Relative Value Arbitrage posted a record 16th consecutive monthly gain, underscoring the strength of credit multi-strategies and traditional convertible arbitrage exposures through the volatility,”, says Kenneth Heinz, president of HFR. “With rapid and violent micro-cycles of oscillating risk off and on sentiment driving extreme volatility and dislocation across equity, fixed income, commodity, currency and cryptocurrency markets, funds remained tactically flexible and opportunistic in positioning with gains across specialised sub-strategies including Active Trading and Volatility.

“With expectations for a continued rapid pace of policy transitions in coming months, institutions and investors looking for both opportunistic exposure to these trends combined with valuable defensive capital preservation are likely to allocate to funds which have successfully executed their strategies through recent heightened volatility,” he adds.