Hedge Funds Fight for Alpha Against Crowding, Underperforming the S&P 500

Despite the difficult beta environment earlier this year, hedge funds are up 8% for the first half of 2025, according to Goldman Sachs’ Q2 “Hedge Fund Trend Monitor.” However, they’re dealing with headwinds to alpha generation due to heavy crowding in positions.

Goldman reports that its VIP list of the stocks that appear most often among funds’ top 10 positions is up 15% year to date. Meanwhile, the S&P 500 is up 11%, while the equal-weight S&P 500 has gained 7%.