Macro Leads the Way in Another Strong Month for Hedge Funds

Macro funds were again the star of the show in another strong month for hedge funds, but although gains were widespread, currency traders struggled again, according to indexation and analytics firm HFR’s latest release.

The HFRI Fund Weighted Composite Index rose 1.92% in February, adding to a strong January and bringing year-to-date gains to +4.38%. For the ninth consecutive month, the HFRI Macro (Total) Index rose, this time by 3.02%, a good follow up to January which saw the index record its highest monthly return since May 2003 at 4.15%. Over the nine months, HFR says the Macro Index is +17.9%.

Sub-strategy performance was led by commodity traders at +4.14%, followed by 3.66% returns for both the Systematic Diversified and Systematic Directional indices. Breaking the trend from last year, systematic traders again outperformed discretionary, as they did in January, and significantly so, with the Discretionary Direction Index returning 0.75%. As noted, the only negative spot on the Macro landscape was the Currency Index, which was -0.33%. Compounding a poor start to the year, this index is now -2.79%.

Trend followers also had a good month, the index rising 3.6%, as did multi-strategy, at +3.47%. Away from macro, Equity Hedge Funds were +2.35% in February, Relative Value funds were +0.7% and Volatility funds were +1.7%. It was another tough month for crypto traders, however, with the Cryptocurrency Index falling 10.64%, for -15.21% over the first two months of the year.

Performance dispersion contracted in February, as the top decile of the HFRI FWC constituents advanced by an average of +10.0%, while the bottom decile fell by an average of -4.7%. The top/bottom dispersion of 14.7% is lower than January’s 18.2%, and for the trailing 12 months ending February 2026, it is 119.0%. HFR says approximately 75% of hedge funds produced positive performance in February.

“Financial market risk sentiment oscillated between risk on and off throughout February, before ending the month on a strong risk off trend that accelerated into early March,” observes Kenneth Heinz, president of HFR. “Hedge funds posted strong, positive (negatively correlated) performance in February, led by Macro and Equity Hedge funds as volatility increased throughout the month driven by AI-related equity market weakness, pressure in private credit portfolios, and rising tensions across commodity and equity markets in the late month military buildup leading into the Iran military conflict. 

“Geopolitical risk has surged to a historic level and hedge funds are actively navigating an unprecedented spike in financial market volatility and dramatic dislocations through the first week of March, which may not only continue but accelerate based on the developments and evolution of the military conflict in Iran,” he continues. “With volatility and risk likely to continue in coming weeks, investors interested in opportunistic, defensive exposure to these powerful trends are likely to allocate to hedge fund managers which have demonstrated strong performance through high risk and high volatility trading environments.”