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HFRI Long Volatility Index surges +1.6 percent in launch month;

Uncorrelated Macro Fundamental Discretionary advances on violent intra-month tariff uncertainty, risk off sentiment;

Equity Hedge Healthcare, Technology gain on month-end risk on recovery

CHICAGO, (May 7, 2025) – Hedge funds navigated a historic volatility surge and violent extremes in risk sentiment, as global financial markets plunged in early April on trade and tariff uncertainty before posting an equally historic and dramatic recovery from the intra-month decline, with most equity indices ending the month with de minimis changes over the prior month. Through the intense equity and fixed income trading month, the HFRI Equity Hedge (Total) Index led strategy performance, posting a gain of +0.7 percent for the month, while the newly launched HFRI Long Volatility Index posted a gain of +1.6 percent. Offsetting these, the HFRI Macro (Total) Index posted a decline of -2.7 percent, with declines led by quantitative, trend-following CTA strategies; the HFRI Fund Weighted Composite Index^® (FWC) declined by -0.5 percent for the month, 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 recovery from March declines, with the Index surging +6.3 percent in April after falling -6.3 percent in March, while the new sub-strategy HFR Cryptocurrency-Quantitative Index surged +9.8 percent for the month. As recently announced, HFR introduced 11 innovative, sophisticated and specialized sub-strategies focused on the Cryptocurrency and Blockchain space. A complimentary research report of the new cryptocurrency sub-strategies is available for download. The HFRI Multi-Manager/Pod Shop Index added +0.3 percent for the month as managers also navigated the historic equity and fixed income trading environment.

Hedge fund performance dispersion expanded again in April, as the top decile of the HFRI FWC constituents advanced by an average of +7.2 percent, while the bottom decile fell by an average of -10.2 percent, representing a top/bottom dispersion of 17.4 percent for the month. By comparison, the top/bottom performance dispersion in March was 15.4 percent. In the trailing 12 months ending April 2025, the top decile of FWC constituents gained +27.6 percent, while the bottom decile declined -25.9 percent, representing a top/bottom dispersion of 53.5 percent. Approximately half of hedge funds produced positive performance in April.

The HFRI Long Volatility Index, first published by HFR on April 16^th and which includes long volatility and tail risk strategies, surged an estimated +1.6 percent in April. The Index is the industry’s leading benchmark for pure long volatility and tail risk strategies, which has quickly become a core area of focus for institutional investors. A complimentary HFR research report on the new Index is available for download. HFR is hosting a private launch event for institutional investors for the Index on May 13 in Boston. Investors interested in attending may request an invitation by emailing events@hfr.com for more information. Please note that space is limited.

Equity Hedge (EH) funds, which invest long and short across specialized sub-strategies, advanced in April, navigating the historic violent intra-month decline and recovery in global equity markets on trade/tariff uncertainty. The HFRI Equity Hedge (Total) Index gained an estimated +0.7 percent, led by Healthcare¸ Technology, Multi-Strategy, Equity Market Neutral, and Fundamental Growth sub-strategy exposures. The HFRI EH: Healthcare Index surged +2.0 percent, while the HFRI EH: Technology jumped +1.7 percent in April. The HFRI EH: Multi-Strategy Index advanced an estimated +1.7 percent, the HFRI EH: Equity Market Neutral Index gained +1.4 percent, and the HFRI EH: Fundamental Growth Index added +1.2 percent.

Event-Driven (ED) strategies, which often focus on out-of-favor, deep value equity exposures and speculation on M&A situations, posted a mixed decline in April, with the HFRI Event-Driven (Total) Index falling an estimated -0.4 percent for the month. ED sub-strategy performance declines were led by the HFRI ED: Activist Index, which fell -3.6 percent, and the HFRI ED: Distressed Index, which declined -1.25 percent. Partially offsetting these losses, the HFRI ED: Special Situations Index advanced +1.45 percent and the HFRI ED: Merger Arbitrage Index posted a narrow gain of +0.2 percent.

Fixed income-based, interest rate-sensitive strategies also declined in April as bonds traded in a wide intra-month range, initially gaining on investor flight to quality before falling on increased trade tariff uncertainty and risk, with the HFRI Relative Value (Total) Index declining an estimated -0.9 percent in April. RVA sub-strategy declines were driven by the HFRI RV: Volatility Index (-4.2 percent), the HFRI RV: FI Asset-Backed Index (-0.7 percent), and the HFRI RV: FI Convertible Arbitrage Index (-0.7 percent).

Uncorrelated Macro strategies led strategy declines in April, reversing prior month gains, with the HFRI Macro (Total) Index falling -2.7 percent, driven by losses in commodity and quantitative, trend-following strategies, which were only partially offset by gains in fundamental, discretionary exposures. The HFRI Macro: Commodity Index fell -4.8 percent while the Systematic Diversified/CTA Index declined an estimated -4.0 percent in April; partially offsetting these, the HFRI Macro: Discretionary Thematic Index jumped +1.4 percent for the month.

Liquid Alternative UCITS strategies also posted mixed performance in April, with the HFRX Absolute Return Index posting a gain of +0.26 percent while the HFRX Global Hedge Fund Index fell -0.43 percent. The HFRX Macro Index posted a sharp decline of -3.0 percent for the month, while the HFRX Event Driven Index and Equity Hedge Indices were flat for the month. The HFRX Relative Value Arbitrage Index posted a gain of +0.2 percent.

“Hedge funds again navigated historic and violent equity market volatility driven by trade, tariff and economic uncertainty in April, but unlike the March volatility, April also included a stunning and extreme intra-month reversal of investor risk sentiment contributing to unprecedented dislocations across equity and fixed income markets and extreme levels of realized volatility. Through this market turmoil, hedge funds generated mixed performance for the month, with gains across Equity Hedge (concentrated in Growth exposures), sophisticated multi-manager/pod shops, and Long Volatility strategies which include option-based tail risk strategies engineered to generate gains in infrequent, low statistical probability financial markets events,” stated Kenneth J. Heinz, President of HFR. “While financial markets traded in a historic extreme range in April, recovering much of the steep declines by month end, hedge funds continue to position for the uncertainty associated with the implementation of new trade policies and economic uncertainty associated with these changes. Sophisticated institutional investors are likely to increase allocations and exposures to hedge fund strategies, including long volatility and pod shops, which have demonstrated their robustness and veracity through these recent historic market cycles, with these offering integral portfolio positive optionality and defensive, negatively correlated gains through the current market cycle of uncertainty and risk.”

 

NOTE: April 2025 index performance figures are estimated as of May 7, 2025