In a year characterized by widespread turbulence and unpredictability across global markets, hedge funds appear to be defying the odds, charting a course toward what could become their most impressive collective performance since the economic recovery that followed the pandemic. Despite a backdrop dominated by shifting geopolitical alliances, fluctuating interest-rate policies, and a series of supply chain and trade disruptions, these funds have demonstrated both adaptability and resilience. According to newly released data from fund administrator Citco, hedge funds collectively recorded an average gain of 16.6% through the first three quarters of the year—an achievement underscored by net inflows exceeding $40 billion as new and returning investors poured fresh capital into the sector.
Citco’s analysis indicates that if current momentum continues, the hedge fund industry is poised to register its strongest full-year performance since 2020. This trajectory has been propelled by a weighted average gain of 5.2% in the third quarter alone, with roughly four out of every five hedge funds—around 80% of all reporting firms—posting positive returns. Each major strategy, from long/short equity and global macro to event-driven and multistrategy approaches, has managed to contribute to the overall upswing. Throughout the year, investment managers have expertly maneuvered through a complex landscape marked by policy volatility, including frequent tariff adjustments, central bank recalibrations of interest rates, heightened tensions across the Middle East, and mounting apprehension over a potential stock market bubble linked to the rapid adoption of artificial intelligence technologies.
Among all categories, multistrategy hedge funds—vehicles that simultaneously allocate capital across multiple, often uncorrelated investment strategies—have distinguished themselves as the frontrunners of 2025. These funds have, on average, appreciated by an impressive 19.3%, outpacing both equity-focused funds, which were up 17.1%, and global macro funds, which delivered average returns of 15.8%. However, even within this category, performance has varied widely: the industry’s most prominent multistrategy titans, Citadel and Millennium, have endured more moderate results by their own high standards, posting year-to-date gains of 5% and 6%, respectively, through the end of September. In comparison, global macro funds came to dominate the third quarter, registering a 6.5% gain, followed by equity funds at 5.6% and multistrategy funds close behind at 4.8%.
While certain sectors within the hedge fund universe have struggled, including commodities and event-driven strategies, both still managed to eke out modest gains during the quarter—an indication of the broad diversification and discipline underpinning the industry’s broader success. Citco’s performance charts illustrate a varied landscape, showing not only the range of results for each strategic category but also indicating the median return—represented visually by a line positioned within each colored distribution box.
Investor enthusiasm, however, remains squarely concentrated in multistrategy funds. Citco’s data reveals that these diversified vehicles have absorbed the vast majority of new investment activity, capturing roughly $30 billion of the industry’s total $41.3 billion in net inflows for 2025. The third quarter alone accounted for a staggering $18 billion in multistrategy inflows—more than three-quarters of all capital added to hedge funds during that period. The next largest recipient category, global macro funds, attracted a comparatively modest $1.4 billion in new investor commitments, underscoring the dominant pull of the multistrategy model.
This rise in popularity correlates with the broader expansion of multimanager funds, a class that significantly overlaps with the multistrategy universe. These vehicles operate by distributing capital across numerous independent investment teams, each pursuing distinct styles and strategies while sharing centralized infrastructure and risk management. Although such structures often entail higher operating costs—many of which are ultimately borne by investors—they have nonetheless proven remarkably attractive for institutions seeking stable, diversified returns. A recent analysis by Goldman Sachs underscores their growing prominence, noting that assets managed under multimanager formats now exceed $425 billion, more than doubling their collective size since 2020. This statistic reflects not only robust investor confidence but also the structural advantages associated with scale, diversification, and risk-adjusted performance.
Declan Quilligan, Citco’s head of hedge fund services, highlighted this phenomenon in a recent press release, attributing the persistent capital inflows to a compelling combination of steady returns and effective diversification. According to Quilligan, investors have maintained their confidence throughout the year, contributing new inflows every month of the third quarter—a clear testament to the enduring appeal of funds capable of delivering consistent results amid macroeconomic volatility. He observed that the blend of adaptable strategy, portfolio diversification, and reliable performance continues to exert a powerful draw on investors seeking stability in a climate of uncertainty.
Citco also observed a historical milestone in trading activity during the same period. Among its client base, September alone witnessed average daily trading volumes nearing 30 million transactions—a record level for the firm’s reporting history. The surge was largely driven by heightened trading in corporate and convertible bonds, equity options, and credit default swaps, all of which saw significant increases in turnover. This elevated level of activity underscores not only the dynamic nature of contemporary hedge fund operations but also the industry’s capacity to thrive amid shifting market conditions and increasingly complex financial ecosystems.
Sourse: https://www.businessinsider.com/hedge-funds-pace-banner-year-multistrategy-multimanager-firms-2025-10
