Hedge Funds Favor Macro Strategies for 2025

By Nell Mackenzie, Carolina Mandl, and Summer Zhen

LONDON (Reuters) – Next year's top pick for hedge fund strategies is so-called macro, with U.S. President-elect Donald Trump at center-stage as investors bet on how global policy decisions will impact economic conditions and play out in financial markets.

Hedge fund returns benefited this year from wild market swings sparked by politics such as November's U.S. election, and twists in monetary policy such as Bank of Japan rate hikes.

Investors are preparing for more volatility in the year ahead, according to seven hedge fund investors and portfolio managers interviewed by Reuters, along with a recent survey's findings.

"Macro seems interesting now given a more turbulent political backdrop and what it means for both fiscal and monetary policy," said hedge fund investor Craig Bergstrom, chief investment officer at Corbin Capital Partners.

U.S. tariff hikes under a new Trump administration could hit the global economy hard, weakening China’s yuan and the euro, while adding inflationary pressures that may constrain the Federal Reserve’s ability to cut rates.

While hedge funds specializing in cryptocurrency outperformed other strategies in 2024—with data provider Preqin estimating a 24.5% annualized return—investors are less confident about cryptocurrencies for 2025.

Macro ranked first and crypto last in a list of hedge fund strategies for 239 investment firms surveyed by Societe Generale in November. Approximately two-fifths of those surveyed intend to invest in macro, while interest in government bond trading has decreased. Meanwhile, funds focusing on commodities and equities ranked second and third, respectively.

Jordan Brooks, co-head of the Macro Strategies Group at AQR, affirmed that sovereign bonds are becoming less important as a key investment theme. "Inflation is now more balanced. From here, we think things are less certain across the board," Brooks noted, highlighting the $7.5 trillion-a-day currency market as a focal point.

Crypto? Not Yet

Although Trump has embraced digital assets, promising favorable regulation and a stockpile of bitcoin, some hedge fund investors remain skeptical.

"We haven't seen a lot of institutional investor demand on the solutions side for crypto trading strategies," said Carol Ward, head of solutions at the $175 billion Man Group. Benjamin Low, a senior investment director at Cambridge Associates, acknowledged that some Asia-based funds have explored limited crypto investments, but nothing substantial has materialized.

Crypto might serve as a good diversifier, trading differently from broader markets, Low stated. "But the volatility is so high; when you talk crypto, what exactly are you trading?" This uncertainty might prompt more questions from existing investors.

Nevertheless, attitudes are evolving, and many funds have updated investor documents in the past few years to allow for crypto exposure, noted Edo Rulli, CIO of hedge fund solutions at UBS Asset Management.

"Larger exposures in non-specialist hedge funds are not there yet. Digital asset exchanges are unregulated and carry reputational and fraud risks," Rulli cautioned, adding that some hedge funds are finding ways to trade crypto indirectly.

NextGen Digital Venture, a Hong Kong-based hedge fund focusing on crypto stocks, surged 116% this year through November due to its exposure to stocks like Coinbase, MicroStrategy, and Marathon Digital Holdings. Founder Jason Huang is preparing his second crypto-focused fund and, while optimistic, warned that bitcoin might reach a cyclical peak next year.

Meanwhile, hedge funds like Millennium Management, Capula Management, and Tudor Investment have increased their exposure to U.S. spot bitcoin ETFs in the third quarter, filings revealed. Furthermore, multi-strategy funds have purchased convertible bonds of software company MicroStrategy, which is the largest corporate holder of bitcoin, whose shares have soared nearly 500% this year.

Skybridge founder Anthony Scaramucci advised that it might take time for crypto to attract more sizable investors, as discussions regarding potential regulations are just beginning. "We're creating now a regulatory runway. Big institutions, endowments, and enterprises are cautious; they don’t want to risk losing their jobs while managing large sums of money," he remarked.