Hedge funds emerged as some of the clearest winners of 2025, capitalizing on a year defined by trade shocks, cross-asset volatility, and sharp macro divergences that challenged traditional portfolios. While equity indices and commodities delivered strong headline returns, it was the dispersion beneath the surface — across rates, currencies, and geopolitical risk — that created ideal conditions for active trading strategies. For several of the world’s largest hedge fund firms, the environment translated into their strongest performance in years.

Macro and Multi-Strategy Funds Thrive in Uncertainty

At the top of the leaderboard was Bridgewater Associates, whose flagship Pure Alpha II fund delivered a reported 34% gain in 2025, its best performance on record. The firm’s All Weather strategy also posted a robust 20% return, underscoring how macro-oriented approaches benefited from rapid shifts in monetary policy expectations, commodity price swings, and currency realignments triggered by U.S. tariff actions.

Bridgewater’s resurgence marks a notable turnaround after a prolonged period of muted returns in the prior decade. Since the firm’s restructuring under new leadership and the full exit of founder Ray Dalio, performance consistency has re-emerged as a defining theme. The firm’s increased reliance on systematic models and machine-learning-driven strategies also appears to be paying off, as data-driven positioning captured trends that eluded more discretionary investors.

Quant and Event-Driven Strategies Deliver Outsized Gains

Quantitative and multi-strategy platforms also flourished. D.E. Shaw & Co. reported strong results across its stable, with its Composite fund gaining nearly 19% and the Oculus strategy advancing more than 28%. These gains highlight how sophisticated arbitrage and relative-value approaches benefited from widening spreads and episodic volatility across asset classes.

Event-driven managers also enjoyed a banner year. Melqart Opportunities Fund posted gains approaching 45%, reflecting successful positioning around corporate actions, restructurings, and policy-driven market dislocations. Meanwhile, AQR Capital Management saw its multistrategy fund rise close to 20%, reinforcing the strength of factor-based and systematic approaches in a year when traditional correlations repeatedly broke down.

Large Platforms Remain Resilient Despite Crowding

Among the industry’s largest firms, performance was solid if less spectacular. Millennium Management delivered gains slightly above 10%, while Citadel posted a similar return. While these results lagged some peers, they remain impressive given the scale of assets under management and the increasingly competitive nature of multi-manager platforms.

Notably, 2025 marked the first time in several years that Millennium outpaced Citadel’s flagship fund, reflecting subtle shifts in risk allocation and strategy emphasis as market conditions evolved.

What Hedge Fund Performance Signals Going Forward

The broader hedge fund industry appears set to close 2025 with its strongest aggregate performance in at least five years. Strong equity markets, record moves in precious metals, and heightened volatility in bonds and currencies created an environment where flexibility and active risk management were rewarded. For allocators, the year reinforced the value of diversification beyond traditional stock-and-bond portfolios.

Looking ahead, sustainability will depend on whether volatility remains elevated as global growth slows and policy uncertainty persists. While not every macro shock produces opportunity, 2025 demonstrated that hedge funds, particularly those with adaptive models and diversified toolkits, remain well positioned when markets are anything but calm.