PivotalPath released their monthly Pivotal Point of View today, which features a comprehensive look at the hedge fund industry and the strategies that are performing best in the current environment.
Key Takeaways
Pivotal Point In Time: February kept hedge funds in positive territory. The PivotalPath Hedge Fund Composite Index returned 1.5%, taking industry YTD performance to 3.6%, the best two-month start to a year since 2012. While performance remained strong the month’s backdrop was less about a smooth risk-on tape and more about policy ambiguity and market volatility.
The US January CPI came in at 0.2% month-on-month and 2.4% year-on-year, while the Fed kept rates unchanged and signaled little urgency to cut, keeping rates and FX markets active through the month. US equities also became less forgiving. By month-end, the S&P 500 and Nasdaq had posted their steepest declines since March 2025, with tech and financials under pressure and equity fund returns in February more driven by rotation and stock-picking than by broad market beta (see Alpha Leaderboard on page 9).
- The clearest February winners were trend-following and macro strategies.
- The PivotalPath Managed Futures Index rose 3.2% in February, taking YTD returns to 7.3%, while the PivotalPath Global Macro Index gained 2.7%, lifting YTD returns to 5.7%.
- Continued strong performance for CTAs came from positive equity trends – especially in Europe and Japan where returns outpaced the US corrections – precious metals uptrends and diversifying commodity and currency trends.
- Macro managers had multiple distinct themes and ways to win, rather than one crowded market narrative. A combination of policy arbitrage, equity drawdowns, rising precious metals, commodity volatility and shifting risk appetite meant tradeable bursts in rates, FX, commodities and index risk could all be taken advantage of.
- Meanwhile, US equities suffered their largest monthly percentage declines in a year, with AI-related anxiety, tariff uncertainty and geopolitical tension all weighing on risk assets, while investors also moved into traditional safe havens such as gold and Treasuries.
- Equity strategies still made money, but February looked more selective than January.
- The PivotalPath Equity Diversified Index returned 1.4%, the PivotalPath Equity Sector Index 1.5%, and PivotalPath Equity Quant Index 1.5% in February.
- At a sub-strategy level, the pressure on AI and the ructions in private credit meant that both the PivotalPath Equity Sector: Financials Index and PivotalPath Equity Sector: Technology/Media/Telecom Index were down 0.9% and 0.5% respectively.
- Last week the PivotalPath team visited its growing and dynamic Asia client base in Hong Kong and Singapore. To read some of the key themes we heard on the ground see pages 4 and 10.
Hedge Fund Performance
Strategy Highlights: While equity returns looked solid in February, with both the PivotalPath Equity Diversified Index and the PivotalPath Equity Sector Index hovering around 1.5%, under the hood not everything was plain sailing.
- At an equity sector level, financials and tech were hit hard late in the month as AI worries, tariff noise and risk-off sentiment weighed on crowded growth exposures.
- The PivotalPath Equity Sector: Technology/Media/Telecom Index was down 0.5%, as investors grew more uneasy about stretched valuations, the disruptive implications of new AI tools for software business models, and broader tariff and geopolitical risks.
- Those concerns were especially visible in software and data-services stocks. Against that backdrop, TMT hedge funds were dealing with an unkind market for crowded growth longs, sharper single-stock reactions, and a clear rotation into more defensive sectors.
- Financials were holed by the same concerns, multiplied by the added anxiety of headlines around opaque private credit plumbing. The PivotalPath Equity Sector: Financials Index fell by 0.9%, as funds offloaded their exposure.
- The same late-February hedge fund flows that flagged net selling in financials also showed net buying in energy/healthcare/staples, a clear snapshot of how managers adapted as defensives held up well. The PivotalPath Equity Sector: Healthcare Index was up 3.5%.
- Utilities gained on power-demand themes, and real estate benefited as softer inflation briefly supported rate-sensitive stocks. The PivotalPath Equity Sector: Real Estate Index was up 3.3% and the PivotalPath Equity Sector: Energy/Utilities/Industrials Index hit 3.2%.
Read the full report here by PivotalPath
