News Digest: Hedge Funds Navigate Historic April Volatility with Mixed Results
May 19, 2025
Hedge funds faced a tumultuous April as global markets experienced extreme volatility driven by uncertainty over trade and tariff policies. Equities plunged early in the month, only to stage a dramatic recovery, leaving most indices little changed by month-end. Amid the chaos, hedge funds posted mixed performance, with some strategies delivering strong gains while others struggled.
The HFRI Equity Hedge (Total) Index led the way with a +0.7% return in April, supported by strong gains in Healthcare (+2.0%), Technology (+1.7%), Multi-Strategy (+1.7%), Equity Market Neutral (+1.4%), and Fundamental Growth (+1.2%) sub-strategies. These funds successfully navigated the violent intra-month equity reversal triggered by shifting sentiment around global trade.
Volatility-focused strategies also benefited from market dislocations. The newly launched HFRI Long Volatility Index gained +1.6%, reflecting investor demand for option-based strategies that protect against tail risk. This performance highlights growing institutional interest in volatility strategies amid macro uncertainty.
Meanwhile, the HFR Cryptocurrency Index rebounded sharply, rising +6.3% after a -6.3% decline in March. The HFR Cryptocurrency-Quantitative Index surged +9.8%, underscoring renewed momentum in digital asset strategies.
Despite these bright spots, other areas suffered. The HFRI Macro (Total) Index declined -2.7%, weighed down by commodity and trend-following CTA losses. The HFRI Macro: Commodity Index fell -4.8%, while Systematic Diversified strategies dropped -4.0%. Discretionary macro managers offered a slight buffer, gaining +1.4%.
Event-Driven strategies were mixed, with the HFRI Event-Driven (Total) Index falling -0.4%. Losses in Activist (-3.6%) and Distressed (-1.25%) strategies were partially offset by gains in Special Situations (+1.45%) and Merger Arbitrage (+0.2%).
Fixed income relative value strategies also posted losses. The HFRI Relative Value (Total) Index declined -0.9%, dragged down by Volatility (-4.2%) and Convertible Arbitrage (-0.7%) exposures.
Hedge fund performance dispersion widened, with top decile managers gaining +7.2%, while the bottom decile lost -10.2%. Over the trailing 12 months, dispersion reached 53.5%, reflecting highly divergent outcomes across strategies and managers.
Kenneth J. Heinz, President of HFR, noted, “April’s volatility was historic not just for its magnitude, but for the sharp intra-month reversal in investor sentiment. Hedge funds demonstrated their adaptability, particularly in equity, multi-manager, and volatility strategies. As uncertainty surrounding trade policy and economic growth persists, institutional investors are likely to increase exposure to strategies that provide diversification and downside protection.”
April showcased both the resilience and the risks of the hedge fund space, as managers adapted to one of the most volatile and unpredictable trading environments in recent memory.
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