With their traditionally high fees – hedge funds haven't always lived up to their marketing hype. However, in 2025 the sector achieved the best results since the world was still reeling from the GFC.

A barometer of how well the global hedge fund industry performs showed that they chalked up a 12.6 per cent gain last year, which is the strongest calendar year result since the aftermath of the global financial crisis.

According to Chicago-headquartered Hedge Fund Research, its HFRI Fund Weighted Composite Index® (FWC) gained by 1.6 per cent in December, producing the 12.6 per cent 2025 result – the highest since 2009.

The rise in December was led by the macro commodity, trend-following and energy fund strategies, HFR said.

With volatile markets caused by geopolitical shifts and uncertainties about the path of macroeconomic policy, the $4.98 trillion hedge fund sector (as of end-September, 2025) has been able to prove its ability to diversify investors’ portfolios, so advocates of hedge funds say.

“The impact of these diverse engines of performance highlights the sophisticated nature of the modern hedge fund industry to deliver uncorrelated performance gains across a wide range of financial market environments,” Kenneth J Heinz, HFR president, said in a statement about the report.

“Through these oscillating cycles of risk-on and -off sentiment, hedge funds generated strong performance with significant contributions from a wide range of exposures and strategies throughout the year, including healthcare, technology, convertible arbitrage, discretionary macro, commodities, systematic quantitative, shareholder activist and energy sub-strategies,” Heinz said.

Equity hedge (EH) funds, which invest long and short across specialized sub-strategies, led strategy performance for 2025, driven by healthcare, energy, and multi-strategy sub-strategies. The HFRI Equity Hedge Index rose 1.8 per cent in December to conclude 2025 up 17.3 per cent, the strongest annual gain for the Index since 2020 and the second strongest gain since 2009.

The HFRI Macro (Total) Index advanced 1.9 per cent in December, extending its positive performance streak to seven months, gaining 9.9 per cent over that period.

Event-driven (ED) strategies, which often focus on out-of-favor, deep value equity exposures and speculation on M&A situations, also advanced in December, driven by expectations for a strong M&A environment in 2026. The HFRI Event-Driven (Total) Index gained 1.5 per cent in December; the whole of last year, it rose 11 per cent – the highest result since 2021.