2025 Hedge Fund Industry Performance through Q3

tl;dr – Hedge funds are having an extremely strong 2025 so far across a variety of strategies, and global hedge fund AUM tracks to exceed $5 trillion USD by end of year.

While in some years, the hedge fund industry underperforms the broader market, this year, hedge funds have posted extremely strong returns. The S&P 500 is up 14.8% through Q3 of 2025, and the HFRI Asset Weighted IWS Composite (“HFRI IWS Composite”) shows strategy-weighted returns of 8.04% for the same period. It is generally the case that the HFRI IWS Composite reflects a significantly lower return than the S&P 500, since strategies that benchmark against the S&P reflect only a portion of the HFRI IWS Composite.

Notably, according to data from Citco, which administers north of $2T in assets (disclaimer: not all hedge fund class), multi-strategy funds have returned on average 19.3%; equities funds have returned on average 17.1%, and global macro funds have returned on average 15.8%. On the other hand, it’s been a challenging year for commodities funds (-1.5%) and event-driven strategies (0.4%), which is perhaps unsurprising given tariff and trade policy related volatility and force majuere style events.

Source: Citco

This data lines up with what Repool is seeing internally as well across its emerging manager heavy base of funds; 2025 looks to be a record year for our client funds, with multiple funds with returns in excess of 30% year-to-date.

According to data compiled by Reuters, institutional asset managers are generally posting strong returns in line with the broader industry trend; this is particularly impressive because, of course (a) driving such returns with large capital bases is significantly more challenging, and (b) in general – without seeing the data itself – it would be reasonable to assume that these firms, on average, have relatively lower risk profiles than the general market.

Naturally, the data published by Reuters does not break down each firm’s underlying strategy performance, and many of the fund returns shown above are the aggregate of pod-style strategies, in which a fund’s net return is the blended output of several or even dozens of individual trading pods and desks, each running a unique portfolio and strategy. If such data were easily available, it would be reasonable to assume that the stronger performers intrafund would tend to reflect a return profile in the same directional vein as Citco has reported.

Of the notable top performers in Reuter’s list, general firm profiles are as follows:

• Bridgewater Pure Alpha (26.2%) – Global macro, systematic, highly diversified across a variety of assets (i.e., stocks, bonds, currencies, and commodities), seeks uncorrelated returns.
• EDL Capital (29.86%) – Global macro, discretionary, with particular expertise in currencies and geopolitical impact. Long EU currency in 2025.
• Pershing Square (23.2%) – Equity, activist, concentrated, long-term. Historically only holds a dozen or so names at a given time.
• Two Seas Global Fund (29.5%) – Harder to find information on, but seems event-driven, which would make it a standout performer in the category.

Alternative assets such as credit and venture dominate headlines and prominence, and common narrative suggests that the hedge fund industry is losing its shine, but these are an incomplete description of industry trends. It would be more accurate to say that other asset classes are growing at record rates, but the hedge fund industry continues to grow significantly – as it generally always has.

There are trends with respect to consolidation of funds, certainly, and we would point at a hollowing out of the “middle”; emerging managers continue to launch and grow, and the larger firms gobble up mid-sized managers. Likely, this is due to two factors: (a) the infrastructure required to deliver strong returns past a certain threshold of capital; and (b) the strength of compensation that larger firms are able to offer today.

A small manager team with $500-$1B AUM begins to run into the same alpha generation and capacity constaints as bigger firms, generally, but lacks the wide array of purpose built technology and infrastructure that its bigger peers have. At the same time, these bigger peers can run rate compensation that is substantially similar to if these such firms remained independent; as such, many of these firms find themselves in a challenging trough.

In any case, the hedge fund industry, according to data from HFR and Bloomberg, has already hit $5 trillion in assets, up from just under $2 trillion in 2010, which means a nearly 10% yearly growth rate for the last 15 years.

Source: Bloomberg and HFR.

While 2025 has been a strong year so far, and that trend has continued through October, two months remain, and increasingly, more and more analysts and industry peers warn of a pull-back. Warnings of this kind tend to increase in most macro cycles when the market is posting continunous strong returns, and there are a variety of unique qualitities behind the 2025 market surge, particularly with respect to AI and Mag7 concentration.

Emerging managers should be careful not to over-read into their own returns YTD as compared to larger peers, given that they should tend to have an easier time generating alpha on a risk-adjusted basis with a significantly lower capital base. Moreover, although certainly not necessarily, emerging managers may lack the hedging sophistication and decaes-long experience of larger firms to skillfully navigate a sudden draw down or market correction event.

Repool’s own experience suggests that smaller funds generally fare worse during market drawdowns as compared to larger funds; in part, this is also because their unit economics are more fragile and cannot bear redemptions as easily as larger funds. In any bubbly-looking market condition, we encourage managers to spend a non-trivial amount of time forecasting various possible draw-down scenarios in the coming 6-12 months and ensure that they have implemented the approrpiate risk-management and hedging strategies to account for possible turmoil.

Sources:

https://www.businessinsider.com/hedge-funds-pace-banner-year-multistrategy-multimanager-firms-2025-10

https://www.reuters.com/sustainability/boards-policy-regulation/how-hedge-funds-performed-september-2025-10-03/

https://www.bloomberg.com/news/articles/2025-10-23/hedge-fund-assets-hit-5-trillion-most-inflows-since-before-financial-crisis