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In January, global financial markets gained to begin 2025 as the Trump administration began implementing significant policy changes focused on immigration and trade. Additionally, large-cap technology traded within a volatile range due to disruptions and competition from emerging AI products. Despite the intense volatility driven by AI innovation, global equity markets posted strong gains to begin the year. Large-cap energy, commodity, and healthcare sectors led US equity gains, while Germany, France, and Brazil led regional performance. Interest rates declined as the US Federal Reserve left rates steady, and inflation data remained stable. The US Dollar gained against the British Pound, Euro, and Swiss Franc. Coffee, Platinum, Silver, and Oil led commodity gains, while Natural Gas experienced a sharp decline.

Hedge funds gained for the month with the HFRX Market Directional Index gaining +2.35% and the HFRX Global Hedge Fund Index gaining +1.00% in January.

HFRX Equity Hedge Index gained + 2.11% for the month from gains in Fundamental Growth, Value, and Market Neutral Strategies. The HFRX Fundamental Growth Index gained +2.86% from gains in exposure to small-cap US and European equities. The HFRX Fundamental Value Index gained +1.79% from gains concentrated in large-cap US and European equities. The HFRX Market Neutral Index gained +1.26% from gains in mean reverting, factor-based strategies.

HFRX Relative Value Arbitrage Index gained +0.87% in January from gains in convertible arbitrage strategies and multi-strategy managers. The HFRX Convertible Arbitrage Index gained +1.61% for the month as volatility was high in January. The HFRX RV: Multi-Strategy Index gained +0.81% as interest rates remained steady.

HFRX Event Driven Index gained +0.66% for the month from gains in merger arbitrage strategies and special situations managers. The HFRX Merger Arbitrage Index gained +1.35% as global equity markets gained in January and M&A deals continued. The HFRX Special Situations Index gained +0.61% from gains in exposure to global, catalyst-driven fundamental value equities.

HFRX Macro/CTA Index declined -0.20% in January from declines in systematic trend-following managers. The HFRX Macro Systematic/CTA Index declined -0.27% despite the US Dollar gaining against most currencies and commodities seeing a fairly positive performance.  Coffee, Platinum, and Silver led commodity gains, while Natural Gas, Cocoa, and Cotton led declines.

Comments reference performance figures as of January 31, 2025