Hedge funds continued to post gains heading into year-end despite elevated volatility, a sharp correction in cryptocurrencies, and mounting questions around artificial intelligence valuations, according to HFR. The HFRI Fund Weighted Composite Index advanced 0.7% in November and is up 11.09% year-to-date, building on a strong third quarter that delivered the industry’s best quarterly return in more than four years.  

Healthcare and equity hedge strategies were standouts. The HFRI EH: Healthcare Index surged 7.6% in November, bringing its six-month return to 44.7%, while equity hedge funds overall gained 1.05% for the month and are up more than 15% year-to-date. HFR said gains were driven by healthcare, equity market neutral, energy, and multi-strategy sub-strategies as managers balanced AI exposure with idiosyncratic stock selection.  

Macro and relative value strategies also contributed, with fixed-income and interest rate-sensitive approaches helping lift the HFRI Relative Value (Total) Index to a 7.03% gain for the year as managers positioned around expected Fed leadership changes and a December rate cut. Crypto was a notable laggard: the HFR Cryptocurrency Index fell 8.0% in November, its weakest monthly performance since February 2025, reflecting the sector’s latest drawdown.  

“Managers have navigated the increase in volatility, which has been driven in part by the tension between optimism around lower rates and AI growth and uncertainty about valuations and the durability of AI-related spending,” said HFR president Kenneth J. Heinz. He added that hedge funds are positioning for a wide range of economic, market, and geopolitical scenarios into 2026 as investors look to extend current trends while preparing for new ones to emerge.