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Fixed income-based HFRI Relative Value Arbitrage posts the 16th consecutive monthly gain as Technology equities suffer steep declines;

Event Driven strategies advance, led by Multi-Strategy, Credit Arbitrage, HFRI Multi-Manager/Podshop Index also gains

CHICAGO, (March 7, 2025) – Hedge funds posted mixed performance in February as financial market volatility surged as a result of new trade and tariff policies, with equity market declines led by steep drops in the growth and technology categories. The HFRI Fund Weighted Composite Index® (FWC) declined by -0.47 percent for the month, as gains in Relative Value Arbitrage and Event Driven strategies were offset by declines in Macro and Equity Hedge strategies, as reported today by HFR®, the established global leader in the indexation, analysis and research of the global hedge fund industry.

The HFR Cryptocurrency Index posted a sharp decline of -16.8 percent in February, as managers navigated a surge in volatility and steep declines across Bitcoin and other cryptocurrencies.

The HFRI Multi-Manager/Pod Shop Index gained +0.92 percent for the month as managers also navigated the policy and technology volatility.

Hedge fund performance dispersion expanded in February, as the top decile of the HFRI FWC constituents advanced by an average of +6.5 percent, while the bottom decile fell by an average of -8.3 percent, representing a top/bottom dispersion of 14.8 percent for the month. By comparison, the top/bottom performance dispersion in January was 12.1 percent. In the trailing 12 months ending February 2025, the top decile of FWC constituents gained +31.2 percent, while the bottom decile declined -15.7 percent, representing a top/bottom dispersion of 46.9 percent. Approximately half of hedge funds produced positive performance in February.

Fixed income-based, interest rate-sensitive strategies produced another gain as a cycle of risk off sentiment drove a sharp decline in interest rates, with the HFRI Relative Value (Total) Index advancing an estimated +0.8 percent for the month, marking the 16th consecutive monthly gain and 29th gain in last 32 months. RVA strategy performance was led by the HFRI RV: FI-Convertible Arbitrage Index, which surged +3.4 percent for the month, followed by the HFRI RV: Volatility Index, which added +1.1 percent.

Event-Driven (ED) strategies, which often focus on out-of-favor, deep value equity exposures and speculation on M&A situations, also gained in February, effectively navigating the trade/tariff volatility, with the HFRI Event-Driven (Total) Index advancing +0.3 percent for the month. ED sub-strategy performance was led by the HFRI ED: Multi-Strategy Index, which jumped +1.4 percent, and the HFRI ED: Credit Arbitrage Index, which added +1.0 percent for the month.

Equity Hedge (EH) funds, which invest long and short across specialized sub-strategies, posted a decline for the month as Technology equities suffered steep declines on the trade/tariff volatility, with the HFRI Equity Hedge (Total) Index falling -0.66 percent. EH sub-strategy gains were led by the HFRI EH: Multi-Strategy Index, which surged +3.1 percent for the month, the HFRI EH: Equity Market Neutral Index, which gained +0.3 percent. These were offset by large declines in Technology-focused hedge funds, with the HFRI EH: Technology Index falling -3.9 percent in February.

Uncorrelated Macro strategies also declined in February as interest rates and commodities declined, with the HFRI Macro (Total) Index falling -1.5 percent in February. Macro sub-strategy losses were led by the HFRI Macro: Systematic Diversified Index, which fell -2.8 percent while the HFRI Macro: Commodity Index also fell -2.4 percent; partially offsetting these the HFRI Macro: Active Trading Index gained +2.0 percent for the month.

Liquid Alternative UCITS strategies advanced in February, with the HFRX Equal Weighted Index gaining +0.36 percent while the HFRX Global Hedge Fund Index added +0.28 percent. Strategy performance was led by the HFRX Relative Value Arbitrage Index, which gained +0.75 percent.

“Driven by trade and tariff uncertainty, hedge funds navigated volatile equity market trends and reversals in February, with gains across Relative Value Arbitrage and Event Driven strategies, as the HFRI Relative Value Arbitrage posted a record 16th consecutive monthly gain, underscoring the strength of credit multi-strategies and traditional convertible arbitrage exposures through the volatility,’ stated Kenneth J. Heinz, President of HFR. “With rapid and violent micro-cycles of oscillating risk off and on sentiment driving extreme volatility and dislocation across equity, fixed income, commodity, currency and cryptocurrency markets, funds remained tactically flexible and opportunistic in positioning with gains across specialized sub-strategies including Active Trading and Volatility. With expectations for a continued rapid pace of policy transitions in coming months, institutions and investors looking for both opportunistic exposure to these trends combined with valuable defensive capital preservation are likely to allocate to funds which have successfully executed their strategies through recent heightened volatility.”

Comments reference Flash Update performance figures as posted on March 7th, 2025.