Hedge Funds Post Best Year in a Decade as Performance, Trading Volumes Surge

Hedge funds rode a powerful mix of macro dislocation, rate volatility and risk‑asset strength to their strongest year in a decade in 2025, according to an annual report from fund administrator Citco. The firm said hedge funds it services delivered a weighted average return of 21.9%, with nearly 90% of funds posting positive performance.

Global macro strategies topped the leader board with returns of 27.7%, while equity and multi‑strategy funds also cleared the 20% mark, helping make 2025 a blockbuster year for both performance and net inflows. Citco reported $62.2 billion in net inflows, the first year of positive flows since 2021, with multi‑strategy vehicles pulling in more than $50 billion. By region, Europe led with $31.5 billion of inflows, followed by $28.8 billion into U.S. managers and $2 billion into Asia.

The performance surge came alongside unprecedented trading activity. Citco said 2025 was a record year for trade volumes, with the fourth quarter the busiest in its history, and straight‑through processing rates still exceeding 96.7%. Volumes climbed across derivatives, credit, equities and swaps, particularly during the tariff‑induced turmoil of early 2025, when credit default swap trading jumped 300% and overall activity rose 25% in February and March. CDS volumes were up 40% again in August.

In September, average daily trades approached 30 million, and equity trading peaked in October at 33 million trades per day. Treasury activity also remained elevated, with more than 700,000 treasury payments processed in 2025, up from 605,000 a year earlier. Citco noted that managers continued to outsource middle‑office functions as they scaled operations to keep pace with higher volumes, volatility and evolving regulatory demands.