Hedge Funds Extend Winning Streak as Event-Driven, Equity Strategies Outperform — Evening Brief – 08.15.25 

Hedge funds carried their first-half momentum into July, posting a modest gain as event-driven and equity long/short managers capitalized on resilient equity markets and robust M&A activity. Roughly 70% of hedge funds generated positive returns during the month, according to Hedge Fund Research (HFR), with the HFR Fund Weighted Composite Index advancing 0.8%. 

Event-driven strategies were the standout, climbing 1.49% in July to bring year-to-date (YTD) performance to 5.85%. Equity hedge managers followed closely, adding 1.22% for the month and pushing YTD gains to 7.25%. Fixed income–based, interest rate–sensitive strategies posted small gains, while global macro funds remained mixed, with sector-wide performance essentially flat. 

HFR President Kenneth Heinz said broad-based gains across event-driven, equity hedge, activist, fixed income, and multi-strategy funds reflected “increased near-term clarity on trade and tariff negotiations, expectations for interest rate reductions, and an improved global economic outlook for the second half of the year.” However, he warned that with equity markets at record highs, “significant risks remain with the potential for reversals and volatility as geopolitical policy changes are factored into global financial markets.” 

Within event-driven, activist hedge funds surged more than 4% in July, leading the group, while multi-strategy funds advanced 1.8%. All other sub-strategies gained more than 1% as M&A activity defied the typical summer slowdown. Man Group’s monthly The Early View report cited successful merger arbitrage trades, highlighting Union Pacific’s $60 billion bid for Norfolk Southern and Palo Alto Networks’ $20 billion acquisition of CyberArk. 

Long/short equity funds continued their positive run, led by healthcare-focused strategies—up nearly 5% in July, though still down 0.62% YTD. Market-neutral, fundamental value, and growth-focused managers also posted gains above 1%. Man Group noted that “beta was generally a larger component of returns versus alpha,” with directional managers outperforming and short alpha “overwhelmingly negative” as high short-interest names rallied on renewed retail enthusiasm reminiscent of “meme-stock mania.” 

Macro hedge funds had another uneven month. The category slipped 0.1% in July, leaving it down 1.32% YTD. Multi-strategy macro funds fell 1.2%, while currency-focused strategies surged 4.5% on strong FX calls. Discretionary macro dipped 0.87% but remains up 7.5% YTD. 

Relative value strategies rose 0.83% in July, bringing YTD gains to 4.2%. Convertible arbitrage led with a 1.85% monthly return, followed by corporate bond–focused fixed income funds at 1.24%. 

Performance dispersion narrowed. The top decile of HFR’s Fund Weighted Composite Index constituents gained 6.7% in July versus a 4.6% drop for the bottom decile, a spread of 11.3%, down from June’s 12.3%. Over the trailing 12 months, the top decile soared 38.1%, while the bottom decile dropped 20.4%, for a dispersion of 58.5%.