Hedge Funds Start 2025 Strong Amid Market Volatility

By Nell Mackenzie and Carolina Mandl
LONDON/NEW YORK (Reuters) – Hedge funds began 2025 on a positive note, navigating volatile markets influenced by uncertainty surrounding new U.S. President Donald Trump’s policies and a decline in Nvidia (NASDAQ:NVDA) due to the emergence of Chinese AI startup DeepSeek, sources told Reuters.

Bridgewater Associates, one of the world’s largest hedge funds, reported an 8.2% gain in January through its flagship macro fund, Pure Alpha, outperforming major stock indexes.

A global tech downturn triggered volatility ahead of Trump’s announcement of extensive tariffs on Canada, Mexico, and China, marking the start of a trade dispute that could hinder global economic growth. Trump postponed the tariffs on Canada and Mexico for one month, causing significant fluctuations in currency, bond, and stock markets.

Despite the chaos, stock-picking hedge funds utilizing company fundamentals consistently gained, averaging a 2.6% return— their best performance since February 2024— supported by a wider market surge, as indicated in a Goldman Sachs note sent to clients on Tuesday.

Technology-focused long/short equity hedge funds adeptly navigated the tech decline. Cadian Capital achieved an 8.32% increase in January, primarily from strong positions in small and mid-cap tech companies. SoMa Equity Partners rose 4.73%, benefitting from positions in Roblox, Wix (NASDAQ:WIX), Uber Technologies (NYSE:UBER), and Elastic (NYSE:ESTC). Shannon River also reported a 2.46% increase, while Light Street experienced a 4.14% upturn.

Systematic equity funds achieved an average return of 2.71%, per the Goldman note. Both U.S. and European stock markets concluded January near record highs, alongside MSCI’s World Stock Index.

Hedge funds employing diverse strategies also concluded the month positively. Daniel Loeb’s Third Point offshore fund increased by 3.3%, while Cinctive gained 2.7%. Citadel’s equity fund reported a 2.7% return in January, with its flagship Wellington fund rising by 1.4%, according to a confidential source.

Business Insider revealed the Wellington results on Monday, noting that all of Citadel’s five strategies ended the month with positive performances. Founded by investor Ken Griffin, Citadel managed $65 billion in assets as of January 1.

Cliff Asness’s AQR Capital Management’s systematic stock fund, the Delphi Long-Short Equity strategy, yielded a net return of 3.5% in January, benefiting from trades in developed equity and selecting lower-risk stocks. This $2.5 billion stock strategy is part of AQR’s broader $123 billion hedge fund. Winton’s multi-strategy quantitative fund ended January up 0.3%, as reported by another source.

Fund Returns for January