Some strategies – like fixed income – gained ground, while those such as macro and equity hedge funds fell into the red against a background of volatile markets, hit by forces such as US trade tariffs.

Hedge funds posted mixed performance in February, with a broad measure of returns slipping as financial market volatility surged amid the Trump administration’s tariff policies, and as major tech stocks slid, new figures show.

Hedge Fund Research said its HFRI Fund Weighted Composite Index® (FWC) fell 0.47 per cent in February from a month before. Gains in relative value arbitrage and event-driven strategies were offset by declines in macro and equity hedge strategies.

“Driven by trade and tariff uncertainty, hedge funds navigated volatile equity market trends and reversals in February, with gains across relative value arbitrage and event-driven strategies,” Kenneth Heinz, HFR president said. “With rapid and violent micro-cycles of oscillating risk off and on sentiment driving extreme volatility and dislocation across equity, fixed income, commodity, currency and cryptocurrency markets, funds remained tactically flexible and opportunistic in positioning with gains across specialized sub-strategies including active trading and volatility.”

Fund performance dispersion expanded in February. The top decile of the HFRI FWC constituents advanced by an average of 6.5 per cent, while the bottom decile fell by an average of 8.3 per cent, representing a top/bottom dispersion of 14.8 per cent for the month.

These investment vehicles have, in recent years, won back a reputation for being able to generate gains when other markets are choppy – important attractions for wealth managers, family offices and private banks seeking portfolio “ballast.”

Among the figures, HFR said its HFR Cryptocurrency Index slumped by 16.8 per cent in February, as managers navigated a surge in volatility and steep declines across bitcoin and other cryptocurrencies.

Fixed income-based, interest rate-sensitive strategies produced another gain as a cycle of risk off sentiment drove a sharp decline in interest rates, with the HFRI Relative Value (Total) Index advancing an estimated 0.8 per cent for the month, marking the 16th consecutive monthly gain and 29th gain in last 32 months.

Event-driven, which often focus on out-of-favor, deep value equity exposures and speculation on M&A situations, also gained in February. The HFRI Event-Driven (Total) Index advanced by 0.3 per cent for the month. 

Equity hedge funds, which invest long and short across specialized sub-strategies, posted a decline for the month as technology equities suffered steep declines on the trade/tariff volatility, with the HFRI Equity Hedge (Total) Index falling 0.66 per cent.

Uncorrelated macro strategies fell as interest rates and commodities declined. The HFRI Macro (Total) Index fell by 1.5 per cent in February.