According to HFR, the Chicago-based hedge fund indexing, research and consulting firm, the HFRI Fund Weighted Composite Index® (FWC) posted a gain of +1.45% in December, rising for the eighth consecutive month, led by Macro commodity, trend-following and Energy strategies. Including the December gain, the FWC surged +12.52% in 2025, the strongest calendar year of hedge fund performance since 2009.
December and 2025 HFRI Performance
Uncorrelated Macro strategies posted the greatest strength during December as the HFRI Macro (Total) Index rose +1.86% gain, extending its positive performance streak to seven months. The Macro sub-strategies which posted the largest gains during the month include the HFRI Macro: Commodity Index which rose +3.68%; the HFRI Macro: Multi-Strategy Index which also rose +2.37%; and the HFRI Trend Following Directional Index which rose +1.71%. Over the course of 2025, the HFRI Macro (Total) Index posted a +7.14% gain, while the HFRI Macro (Total) Asset Weighted Index rose +6.45%.
Equity Hedge strategies, which invest long and short across specialized sub-strategies, also performed well in December as the HFRI Equity Hedge (Total) Index rose +1.57% during the month. This increase was paced by the +3.48% surge in the HFRI EH: Sector – Energy/Basic Materials Index; the +1.69% increase in HFRI EH: Fundamental Value Index; and the +1.59% rise in the HFRI EH: Equity Market Neutral Index. Over the course of 2025, the HFRI Equity Hedge (Total) Index rose a robust +17.05% while the HFRI Equity Hedge (Total) Asset Weighted Index posted a +14.74% gain.
Event-Driven strategies, which often focus on out-of-favor, deep value equity exposures and
speculation on M&A situations, recorded significant strength during December as the HFRI Event-Driven (Total) Index rose +1.40% during the month. The Event-Driven sub-strategies which led December’s hedge fund performance include the HFRI ED: Activist Index, which rose +4.39%; the HFRI ED: Multi-Strategy Index, which rose +1.76% for the month; and, the HFRI ED: Credit Arbitrage Index which rose +1.47%. Throughout 2025, the HFRI Event Driven (Total) Index rose +10.91% while the HFRI Event Driven (Total) Asset Weighted Index recorded a +10.25% gain.
Fixed income-based, interest rate-sensitive strategies also performed well during December, as the HFRI Relative Value (Total) Index rose +0.58%. This performance was paced by a +4.09% increase in the HFRI RV: Yield Alternative Index; a +0.98% gain in the HFRI RV: Fixed Income – Sovereign Index; and a +0.77% rise in the HFRI RV: Fixed Income Corporate Index. During 2025, the HFRI Relative Value (Total) Index rose +7.62% while the HFRI Relative Value (total) Asset Weighted Index recorded an +8.54% increase.
Our Take
The increase in hedge fund performance during December is a testament to the industry’s resilience and strategic agility. Despite the challenges posed by market volatility and economic uncertainties earlier in 2025, hedge funds were able to record solid gains throughout the remainder of the year, driven by a combination of strong equity hedge and event driven strategies, along with steady gains in macro and relative value arbitrage.
Kenneth J. Heinz, CEO of HFR explained the robust performance seen from hedge funds in December, saying, “Hedge funds posted the strongest calendar year of performance since 2009, led by broad-based gains across all strategies and driven by strong momentum in AI technology investment, spending and infrastructure build – a dominant, powerful trend which has accelerated into 2026. In addition to this powerful risk-on sentiment, hedge funds also navigated volatile and complex risk-off market cycles throughout the year, including the Liberation Day historic volatility spike, a sharp correction in the cryptocurrency market, and reversals of AI sentiment driven by concerns about valuation and sustainability of AI investment and spending. Through these oscillating cycles of risk-on and -off sentiment, hedge funds generated strong performance with significant contributions from a wide range of exposures and strategies throughout the year, including Healthcare, Technology, Convertible Arbitrage, Discretionary Macro, Commodities, Systematic Quantitative, Shareholder Activist and Energy sub-strategies. The impact of these diverse engines of performance highlights the sophisticated nature of the modern hedge fund industry to deliver uncorrelated performance gains across a wide range of financial market environments. Institutions and individual investors looking for access to these important exposures are likely to accelerate industry capital growth to historic records in 2026.”
As we move into 2026, investors and analysts will be watching closely to see whether hedge funds will be able to continue to drive outperformance and growth in the hedge fund industry. Clearly, the ability of hedge funds to adapt and innovate will be paramount in sustaining growth and delivering value to investors.