The global hedge fund industry delivered its strongest performance in at least five years during 2025, as market volatility triggered by the Trump administration's trade war created substantial opportunities for traders.
On Friday, January 2nd, Eastern Time, media reports indicated that hedge funds achieved their highest overall returns in at least five years during 2025. Bridgewater Associates, the world's largest hedge fund, saw its flagship Pure Alpha II fund post a record 34% return, decisively breaking a prolonged slump from 2012 to 2024 where annual returns failed to exceed 3%. D.E. Shaw's flagship strategy fund also performed admirably, while the Melqart Opportunities Fund led the pack with a 45% return.
According to reports, Bridgewater achieved its highest annual profit in 50 years under the leadership of current CEO Nir Bar Dea. Beyond Pure Alpha II, Bridgewater's China Macro Fund and its All Weather strategy fund also delivered returns of 34% and 20%, respectively. D.E. Shaw's flagship diversified strategy composite fund, the D.E. Shaw Composite, grew by 18.5%, while its Oculus fund achieved a notably high return of 28.2%.
Commentary suggests the robust performance of hedge funds was primarily fueled by a significant surge in U.S. stocks driven by artificial intelligence (AI) themes, coupled with intense volatility in bond and currency markets stemming from Trump's trade war. In 2025, the three major U.S. stock indices recorded double-digit annual gains for the third consecutive year, a phenomenon last witnessed between 2019 and 2021.
Preliminary media statistics, illustrated in the chart below, reveal that among 25 major hedge funds, slightly more than half—14 funds in total—outperformed the S&P 500 index, which accumulated a 16.7% gain. However, only seven surpassed the Nasdaq's approximate 20.4% rise, with three of those hailing from Bridgewater. Additional media reports on Friday indicated that Citadel's flagship Wellington hedge fund returned 10.2% for the full year. If accurate, this would mean the fund managed by Ken Griffin also underperformed the broader market.
Macro Strategy Funds Deliver Stellar Performance
Multiple funds under Bridgewater achieved breakthrough results in 2025.
On Thursday, media outlets cited informed sources stating that, as of December 29th, Bridgewater's flagship Pure Alpha II fund returned approximately 33% to 34% for the full year, significantly outperforming the S&P 500 index over the same period. As a global macro fund, it typically invests across equities, bonds, currencies, and commodities.
Statistics released by media on Friday showed an even more outstanding performance from Bridgewater's Asia Total Return Fund, which recorded a 37% return, securing the second position among the 25 major hedge funds. Bridgewater's China Total Return Fund also achieved a 34% gain, tying with the flagship fund. The risk parity-based All Weather fund garnered a 20% return.
As of September 30th, Bridgewater's assets under management were approximately $92 billion.
According to Thursday's reports, Bridgewater has been actively deploying new strategies in recent years, including a $5 billion fund named AIA Macro that utilizes AI for investment decisions, which returned 11.9% over the same period. The firm launched its "Artificial Investor" tool in 2024, a strategic shift traceable back to 2018 when Co-Chief Investment Officer Greg Jensen recruited Chief Scientist Jas Sekhon.
Event-Driven Funds Lead the Pack
The event-driven Melqart Opportunities Fund, managed by Michel Massoud, claimed the top spot with a 45.1% return. Media sources indicated this performance positioned it as one of the best-performing hedge funds of 2025.
Event-driven strategies profit by capitalizing on investment opportunities arising from corporate events like mergers, acquisitions, and restructurings. Against a backdrop of heightened trade policy uncertainty, the flexibility of such funds was fully demonstrated.
Kite Lake Special Opportunities, which also employs an event-driven strategy, recorded a 17.9% return, placing it in the middle tier of the industry.
Diversified Strategy Funds Show Mixed Results
D.E. Shaw's two flagship funds both outperformed the market benchmark. Reports stated that its Oculus fund has not recorded a negative return year since its inception in 2004, achieving a net return of approximately 28.2% in 2025, with an annualized net return of 14.4%. The larger Composite fund realized a net return of about 18.5%, boasting an annualized net return of 12.9% since its 2001 launch, with only one annual loss occurring during that period.
As of December 1st, D.E. Shaw, founded in 1988, managed over $85 billion in assets, spanning hedge funds, private markets, multi-asset classes, and active equity investment strategies.
Performance among other multi-strategy funds varied.
In 2025, Dymon recorded an 18.1% return, ExodusPoint achieved an 18.04% return—its best performance since its 2017 inception—and Balyasny reached 16.7%. However, industry giant Millennium returned only 10.5%, and like Citadel's Wellington fund, failed to beat the S&P 500. Walleye, Pinpoint Multi-Strategy, and New Holland Tactical Alpha posted returns of 15.5%, 11.6%, and 9.8%, respectively.
Equity Strategies Show Significant Divergence
Equity long/short strategy funds exhibited a stark performance divide. Soroban Opportunities delivered a strong 25% return, significantly outpacing the market benchmark. Anson Investments Master, an equity strategy fund, achieved a 21.2% gain.
Schonfeld's Fundamental Equity fund grew by 16.5%, slightly underperforming the S&P 500, while its multi-strategy fund, Strategic Partners, recorded a 12.5% return. Marshall Wace's Eureka/Equity Long-Short strategy grew by 11.6%, and the FIFTHDELTA Equity Fund returned 10.3%.
The quantitative strategy fund Winton's multi-strategy return was 7.4%, ranking last among the 25 funds surveyed.
According to Friday's reports, the multi-strategy Apex Strategy from billionaire investor Cliff Asness's AQR Capital Management posted a 19.6% annual gain, while its alternative trend-following Helix Strategy grew by 18.6%.
Market volatility created price arbitrage opportunities for actively managed funds. In a research report released earlier last year, D.E. Shaw pointed out a "supply-demand imbalance" in the costs of instruments used by investors to hold S&P 500 constituent stocks. This structural opportunity was amplified by the market turbulence induced by Trump's policies.
