Hedge funds rode buoyant stock market to deliver double-digit gains in 2025, Goldman Sachs says

• Healthcare-focused long/short funds surged 27.2% for the year, while tech, media, and telecom funds gained 13.5%; systematic and quant funds posted 19.11% annual returns
• Gross leverage for global long/short funds reached an all-time high of 213.2%, with overall hedge fund leverage at 292.8% (roughly $300 in positions for every $100 of investor capital)
• In December, hedge funds unwound North American positions at the fastest pace in four months, while U.S. multi-managers extended their winning streak to nine consecutive months of positive returns

Hedge Funds Deliver Strong Returns in 2025 Amid AI Rally and Market Volatility

Key Performance Metrics:

Hedge funds achieved robust gains in 2025, with stock-picking funds returning 16.24%, nearly matching the S&P 500's 16.4% annual return, according to Goldman Sachs prime brokerage data. In December alone, global long/short funds rose 1.28%.

Top Performers:

Large multi-manager funds including D.E. Shaw, Balyasny Asset Management, Bridgewater Associates, and Point72 Asset Management posted mostly double-digit gains, driven by an AI-powered stock market rally. Systematic and quant funds excelled with 19.11% annual returns and 2.4% in December.

Sector Highlights:

Healthcare long/short funds led with 27.2% annual gains despite a 2.4% December decline. Technology, media, and telecom funds returned 13.5% for the year. In December, funds sold software and tech hardware while increasing positions in IT services.

Leverage Reaches Record Levels:

Gross leverage for Goldman's overall prime book jumped to 292.8% in December—meaning hedge funds held approximately $300 in positions for every $100 of investor capital. Global long/short funds hit an all-time high leverage of 213.2%, as funds used debt-backed strategies to amplify returns.

Market Activity:

Funds unwound North American positions at the fastest pace in four months during December, with closed short positions outpacing long bets. Similar sell-offs occurred in Europe and Asia. U.S.-focused multi-managers posted their ninth consecutive month of positive returns, while European and Asian long/short funds each gained 1.8% in December.

The strong performance reflects hedge funds' ability to navigate trade policy uncertainty and capitalize on AI-driven market momentum while employing aggressive leverage strategies.