Hedge funds experienced substantial gains throughout 2025, bolstered by strong stock market performance and volatility stemming from uncertainty surrounding United States trade policies, according to a Goldman Sachs report. Stock-picking funds specifically saw returns of 16.24%, aligning closely with the benchmark S&P 500 index’s rise of approximately 16.4% for the year. December proved fruitful as well, with global long and short funds increasing by 1.28%, propelled by strategic asset positioning, crowded stock bets, and focused short positions.
Large multi-manager funds, including D.E. Shaw, Balyasny Asset Management, Bridgewater Associates and Point72 Asset Management, reported primarily double-digit gains last year. This surge was largely attributed to an AI-driven stock market rally. Furthermore, funds benefited from volatility in bond and currency markets instigated by U.S. trade wars. These macro long and short funds commonly invest in stocks, bonds, currencies and commodities.
Technology, media, and telecom-focused funds recorded gains of 13.5% for the year, while healthcare long and short funds jumped 27.2% during the same period, despite a minor decline in December. On a net basis, the software and tech hardware sectors experienced a sell-off in December, as stock pickers instead built up positions in the information technology services sector. Gross leverage levels for Goldman’s overall prime book jumped significantly in December, reaching nearly three times the book value, indicating that hedge funds were operating with roughly $300 in long and short positions for every $100 of investor capital.
In December, hedge funds reduced their positions in North American assets at the fastest rate in four months, while U.S.-focused multi-managers delivered positive returns for a ninth consecutive month. European and Asian long and short funds both climbed 1.8% in December. Systematic stock traders and quant funds, on average, reported gains of 2.4% in December, bringing their overall gains to 19.11% for the year, according to the Goldman Sachs data.
