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

By Anirban Sen

NEW YORK, Jan 7 (Reuters) – Hedge funds notched robust gains in 2025, as broader stock indexes ended the year near record highs and markets braved volatility triggered by uncertainty around U.S. trade policy, according to a Goldman Sachs report.

Stock-picking funds posted returns of 16.24%, according to the Goldman Sachs prime brokerage note that was sent to clients this week, roughly in line with the benchmark S&P 500 index, which finished the year up about 16.4%.

For the month of December, returns for global long and short funds rose 1.28%, as positions in specific assets, crowded bets in stocks, and concentrated short positions drove gains for the funds. 

Reuters reported earlier in January that large multi-manager funds, including D.E. Shaw, Balyasny Asset Management, Bridgewater Associates and Point72 Asset Management, generated mostly double-digit gains last year, boosted by an AI-powered stock market rally.

Funds have also benefited from U.S. President Donald Trump’s trade wars that triggered volatility in bond and currency markets. Large macro long and short funds typically invest in stocks, bonds, currencies and commodities.

Technology, media, and telecom-focused funds posted gains of 13.5% for the year, while healthcare long and short funds jumped 27.2% during the same period despite a 2.4% decline in December. On a net basis, the software and tech hardware sectors witnessed a sell-off in December, while stock pickers built up positions in the information technology services sector. 

Gross leverage levels for Goldman’s overall prime book jumped 7.7 points to 292.8% in December, or nearly three times the book value, the bank said in the report. That data means that for every $100 of capital from investors, hedge funds on average had roughly $300 in long and short positions.

For global long and short funds, gross leverage levels were at an all-time high at 213.2%, the Goldman data showed. Reuters reported in December that hedge funds are using near-record levels of leverage to trade equities and betting on debt-backed strategies in efforts to juice returns, making the most of markets that have been buoyed by a boom in artificial intelligence.

In December, hedge funds unwound positions in North American assets at the quickest pace in four months, as a higher number of closed short positions outweighed long bets. Funds sold off similar positions in other regions, including Europe and Asia.

U.S.-focused multi-managers delivered positive returns for a ninth consecutive month, while European and Asian long and short funds both climbed 1.8% in December. 

Systematic stock traders and quant funds on average reported gains of 2.4% in December, bringing their overall gains to 19.11% for the year, the Goldman data showed. 

(Reporting by Anirban Sen in New York; Editing by Kirsten Donovan)