The Q1 2025 Hedge Fund Barometer, published by Unlimited, a leading asset management firm and ETF sponsor, reveals a significant shift in hedge fund positioning during the first quarter of the year. The report highlights a reversal of pro-growth positions in both U.S. equities and corporate bonds, as well as an increase in bets on gold. According to the report, hedge fund managers entered the year with relatively low conviction and modest views, but subsequently ramped up pro-growth positions, including long the U.S. dollar, credit spreads, and equity bets, in line with increased expectations of U.S. growth from the new administration. However, these positions were largely reversed starting in February, with the exception of extending bullish positions on gold. “Hedge fund positioning shows some of the lowest conviction in the direction of asset prices that we have seen in decades,” said Bob Elliott, CEO and CIO of Unlimited and portfolio manager of actively-managed ETFs. “Those positions were a dramatic transition from the beginning of the quarter when hedge funds were ramping up their bullish bets on the U.S. economy. The prominence of policy volatility likely triggered managers’ reluctance to hold significant directional positions.”
This reversal of pro-growth positions is significant, as it suggests that hedge fund managers are becoming increasingly cautious and risk-averse. The report notes that emerging market funds outperformed meaningfully, with Chinese stocks surging, while equity long-short and event-driven strategies came in weak. Key highlights from the Q1 2025 Hedge Fund Barometer include:
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- Emerging Market funds outperformed, with a 6.3% return, while Equity Long/Short and Event Driven strategies performed poorly, with returns of -0.8% and -0.8%, respectively.
- U.S. dollar long positions became increasingly popular, with the majority of positions being reversed starting in February.
- Bullish outlook on oil shifted towards neutral, while Chinese and Japanese equities became more bullish.
- U.S. biotech was underweight in the quarter.
- Equity Long/Short managers remained bearish on U.S. small and mid-cap companies.
The report also highlights the importance of policy volatility in shaping hedge fund positioning. The prominence of policy volatility likely triggered managers’ reluctance to hold significant directional positions, leading to a reversal of pro-growth positions. Another key aspect of the report is the performance of emerging market funds, which outperformed meaningfully, with Chinese stocks surging. This suggests that emerging markets are becoming increasingly attractive to hedge fund managers, who are looking to capitalize on the growth potential of these markets. However, the report also notes that equity long-short and event-driven strategies performed poorly, with returns of -0.8%. This suggests that these strategies are not as effective in the current market environment, and that hedge fund managers are becoming increasingly cautious and risk-averse. In conclusion, the Q1 2025 Hedge Fund Barometer provides valuable insights into the positioning of hedge fund managers during the first quarter of the year. The report highlights the reversal of pro-growth positions in both U.S. equities and corporate bonds, as well as an increase in bets on gold. The findings of the report suggest that hedge fund managers are becoming increasingly cautious and risk-averse, and that emerging markets are becoming increasingly attractive.
| Industry Return | 1Q25 Hedge Fund Strategy Performance, Gross of Fees |
|---|---|
| Industry Return: 1.7% |
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The Q1 2025 Hedge Fund Barometer provides a comprehensive overview of hedge fund positioning during the first quarter of the year. The report highlights the importance of understanding hedge fund positioning and the implications of this positioning for investors.
“Hedge fund positioning is a critical component of our investment strategy, and we closely monitor these positions to ensure that our clients are positioned for success in the market. The Q1 2025 Hedge Fund Barometer provides valuable insights into the positioning of hedge fund managers, and we are excited to continue to provide our clients with this information.” – Bob Elliott, CEO and CIO of Unlimited
About Unlimited
Unlimited is an investment firm that uses proprietary technology to create strategies that offer lower-cost access to 2 & 20-style alternative investment strategies, such as hedge funds, to a wide variety of investors. The firm was founded in 2022 by Bob Elliott, Bruce McNevin, and Matt Salzberg. For informational and educational purposes only and should not be construed as investment advice. The data shown herein represents past performance and should not be construed as providing any assurance or guarantee as to returns that may be realized in the future. No representation is being made that any investment will or is likely to achieve profits or losses similar to those shown herein. No investment strategy or risk management technique can guarantee return or eliminate risk in any market environment.
Investors should carefully consider their investment goals, risk tolerance, and time horizon before investing in any investment strategy.
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