Hedge Funds Notch 10th Consecutive Quarter of Positive Returns Despite Tariff Volatility
Hedge funds achieved their tenth consecutive quarter of positive returns in the first quarter of 2025, posting a weighted average return of 2.8%, despite volatility triggered by escalating global trade tensions, according to Citco’s latest data. This performance mirrored the 2.8% return in the fourth quarter of 2024, with 62% of Citco-administered funds finishing the period in positive territory.
Multi-strategy hedge funds outperformed others, averaging a 4.7% return, closely followed by global macro strategies at 4.5%. Equity and commodities strategies each returned 1.6%, while fixed income arbitrage strategies gained a modest 1.1%. Event-driven strategies, however, were the only underperformers, declining by 3.4% on average. Larger funds, managing over $3 billion in assets under administration, excelled with a 4.6% average return, while smaller funds saw more subdued results.
Despite market disruptions from new trade tariff announcements, investor confidence in hedge funds remained robust, with net inflows reaching $7.1 billion, fueled by $46.9 billion in subscriptions against $39.8 billion in redemptions. January and February saw strong inflows exceeding $4 billion each, though March recorded a $1.4 billion net outflow. Multi-strategy funds were particularly active, drawing $3.5 billion in net new capital, partially offsetting late-2024 losses. Trading activity also soared to record levels, with equity, equity options, index futures, and bank debt volumes hitting new highs, alongside a 16% year-over-year increase in treasury payments, totaling 163,971.
Declan Quilligan, head of hedge fund services at Citco Fund Services (Ireland) Limited, noted that despite market turbulence caused by trade tariffs, hedge funds continued to deliver consistent returns, attracting increased investor allocations, particularly to multi-strategy funds.
Looking forward, Quilligan noted that rising market volatility could further boost demand for hedge funds as investors seek to diversify and mitigate risks.