Macro hedge funds drive February gains as geopolitical risks rise

Hedge funds extended their run of positive performance in February, with macro and equity hedge strategies leading gains as markets navigated rising geopolitical tensions, AI-driven sector disruption and growing pressure in private credit, according to HFR.

The HFRI Fund Weighted Composite Index rose 1.9 per cent during the month, marking its tenth consecutive monthly gain. Performance was led by trend-following macro strategies, particularly those focused on commodities and energy, as volatility increased toward the end of February ahead of the military conflict in Iran that began on 28 February.

Macro strategies were the strongest performers. The HFRI Macro (Total) Index gained 3.0 per cent in February, following January’s 4.15 per cent rise, its best monthly return since 2003 — extending its streak to nine consecutive months of gains.

Within the strategy, commodity-focused managers led performance. The HFRI Macro: Commodity Index rose 4.1 per cent, while the HFRI Macro: Systematic Diversified Index gained 3.7 per cent. By contrast, the HFR Cryptocurrency Index fell 10.6 per cent, its largest decline since February 2025.

Equity hedge strategies also posted strong returns. The HFRI Equity Hedge (Total) Index rose 2.35 per cent, supported by exposures to energy, healthcare and fundamental equity strategies.

Relative value strategies delivered more modest gains, with the HFRI Relative Value (Total) Index rising 0.7 per cent as falling interest rates supported fixed-income trades. Event-driven funds also ended the month in positive territory, with the HFRI Event-Driven (Total) Index up 0.3 per cent.

Performance dispersion remained wide. The top decile of hedge funds gained an average of 10.0 per cent in February, while the bottom decile fell 4.7 per cent. Around 75 per cent of funds posted positive performance.

HFR president Kenneth J Heinz said markets shifted between risk-on and risk-off sentiment throughout the month before ending on a defensive note. He added that rising geopolitical tensions and continued volatility could create opportunities for hedge fund managers able to navigate rapidly changing market conditions.