- Hedge funds saw a return of 2.8% in Q1, amid impact of trade tariffs on markets
- Market leadership changed, as Multi-Strategy took the top spot
- Investors back hedge funds with return to net inflows
New York/London, 28 April 2025: Anticipation of sweeping trade tariffs sent shockwaves through markets in the latter stages of the first quarter, but hedge funds nevertheless managed to rack up their 10th consecutive quarter of positive returns after a very strong start to the year.
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Funds administered by the Citco group of companies (Citco) achieved an overall weighted average return of 2.8% in Q1, matching the previous quarter, with 62% of funds in positive territory.
Most strategy groups saw positive returns; Multi-Strategy funds were the top performers, with a weighted average return of 4.7%, while Global Macro was close behind at 4.5%. They were followed by Equity and Commodities-focused strategies, which both had weighted average returns of 1.6%, and then Fixed Income Arbitrage strategies at 1.1%. Event Driven strategies were negative overall in Q1, with a weighted average return of -3.4%. On an Assets under Administration (AUA) basis, the largest funds with more than $3bn of AUA stood out, with a weighted average return of 4.6%, while all other categories saw more muted returns.
Flows into hedge funds turned positive in Q1, reversing some of the net outflows seen in Q4. Total net inflows came in at $7.1bn, driven by subscriptions of $46.9bn which outweighed redemptions of $39.8bn. Both January and February saw net inflows of more than $4bn, before net outflows of $1.4bn in March.
Multi-Strategy funds saw the most activity throughout the quarter, with net inflows in January and February, before outflows in March, leaving them with net inflows of $3.5bn overall. This reversed some of the outflows seen in the previous quarter.
The first quarter of 2025 also shattered previous records in terms of trading volumes. Featuring the two busiest months since Citco started producing these reports, it surpassed the previous peak seen in Q4 of last year, with Equity and Equity Options, Index Futures and Bank Debt all seeing new highs.
Meanwhile, treasury payments stood at 163,971 in the first quarter, up 16% versus the corresponding quarter last year. While Q1 2025 dipped marginally versus the record 164,971 payments seen in the final quarter of last year, it nonetheless got the year off to its strongest start since Citco started producing reports.
Declan Quilligan, Head of Hedge Fund Services, Citco Fund Services (Ireland) Limited, said:
“Hedge funds faced headwinds from tumbling markets in the first quarter of 2025 as investors reacted to a series of trade tariff announcements which have caused upheaval across the globe.
“Nonetheless, funds continued to deliver for investors with the 10th consecutive quarter of positive returns, and investors opted to increase their positions in hedge funds, with inflows to Multi-Strategy funds standing out at a strategy level, while trade volumes also spiked to record levels alongside surging treasury volumes.
“The path ahead is very uncertain, with markets having to contend with near-daily developments around tariffs since the end of Q1, and we have seen the sell-off intensify at the start of the second quarter. If the situation escalates, investors may well look to hedge funds to offer diversification away from the worst of the turmoil.”
About the Citco group of companies (Citco)
The Citco group of companies (Citco) is a network of independent companies worldwide. These companies are leading providers of asset-servicing solutions to the global alternative investment industry. With $2 trillion in assets under administration and operations spanning across 36 countries, Citco’s unique culture of innovation and client-driven solutions have provided Citco’s clients with a trusted partner for more than four decades.
