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In December, global financial markets delivered mixed performance, concluding a strong year of gains across most asset classes. Market returns continued to be supported by expectations for sustained AI-related spending and lower interest rates, partially offset by concerns around AI valuations and persistent inflation pressures. Global equity markets posted muted gains during the month, with most U.S. indices essentially flat, while international markets recorded narrow gains. Interest rates rose as economic growth remained firm and investors expressed uncertainty regarding the number of interest-rate cuts likely in 2026. The U.S. dollar declined against most major currencies. Commodities were mixed, with metals surging to lead gains – driven by Platinum and Silver – while Natural Gas recorded steep declines, Oil prices fell, and agricultural commodities delivered mixed results.

Hedge funds posted gains in December with the HFRX Global Hedge Fund Index gaining +0.58% in December and +7.14% for 2025.

HFRX Macro/CTA Index gained +1.30% in December and +5.59% for 2025 from gains in systematic trend-following managers. The HFRX Macro Systematic/CTA Index gained +2.53% and +5.82% for 2025 as the U.S. dollar declined against most major currencies and commodities saw mixed performance. Silver, Platinum, and Cocoa led commodity gains, while Natural Gas, Oil, and Coffee led declines.

HFRX Equity Hedge Index gained +0.92% for the month and +10.06% for 2025 from gains in fundamental value, growth, and market neutral strategies. The HFRX Fundamental Value Index gained +1.14%, +8.12% for 2025, from gains in in exposure to large-cap US and European equities. The HFRX Equity Market Neutral Index gained +0.60% and +6.36% for 2025 from gains in mean reverting, factor-based strategies. The HFRX Fundamental Growth Index gained +0.59%, +14.28% for 2025, from gains concentrated in small-cap US and European equities.

HFRX Relative Value Arbitrage Index gained +0.22% in December and +6.14% for 2025 from gains in convertible arbitrage strategies and multi-strategy managers. The HFRX RV: Multi-Strategy Index gained +0.22% and +5.55% for 2025 as interest rates rose in December. The HFRX Convertible Arbitrage Index gained +0.20% and +12.78% for 2025 as volatility fell in December.

HFRX Event Driven Index gained +0.18% for the month and +5.88% for 2025 from gains in merger arbitrage strategies and special situations managers. The HFRX Merger Arbitrage Index gained +1.23%, +9.57% for 2025, as M&A deals continued through December 2025, and global equities were relatively flat for the month yet concluded with a strong year of gains. The HFRX Special Situations Index gained +0.10%, +5.63% for 2025, from gains in exposure to global, catalyst-driven fundamental value equities.

Comments reference performance figures as of January 2, 2026