Stockpicking Hedge Funds Make a Comeback as Market Volatility Returns

Strategic Insights -

Market turbulence this year has attracted fresh capital to the sector, with $10bn in inflows in the first half of 2025, the first such inflows in nearly a decade. Sizeable gains from hedge funds such as TCI and Egerton have helped the sector recover from nine years of redemptions. The long-short strategy has been among the best performers in the hedge fund industry this year, with a 9.2% return in the first half.

Key Takeaways:

  • Stockpicking hedge funds have made a comeback in 2025, with $10bn in inflows in the first half of the year, according to Hedge Fund Research.
  • The long-short strategy has been one of the best performers in the hedge fund industry this year, with a 9.2% return in the first half, according to PivotalPath.
  • Notable hedge funds such as TCI, Egerton, and Kintbury Capital earned returns of 20% or more, while SurgoCap Partners, a hedge fund founded by Mala Gaonkar, is up 17% this year after rising 33% last year.
  • Equity strategies in Europe have outperformed any region this year, according to PivotalPath, and investors are seeking alternatives to broad index-level exposure amid market swings.
  • The market volatility has been attributed to President Donald Trump's tariff salvo in April, which caught investors' attention and made it a fertile environment for stockpickers.
  • Some stockpickers believe that higher interest rates have helped them reap the benefits of relatively high interest rates.
  • A broadening of equity market returns, driven by defence stocks such as Rheinmetall in Germany and BAE in the UK, has also helped stockpickers.
  • Market analysts believe that the industry's revival is partly due to the reduced dominance of large US technology stocks in broad indices, allowing room for stockpickers to excel.

Statistics:

  • $10bn: Net inflows into long-short hedge funds in the first half of 2025, according to Hedge Fund Research.
  • 9.2%: Return of the long-short strategy in the first half of 2025, according to PivotalPath.
  • 20%: Return of TCI, Egerton, and Kintbury Capital in the first half of 2025.
  • $1.8bn: Investor capital raised by SurgoCap Partners when it launched in 2023.
  • $5bn: Current assets under management by SurgoCap Partners.
  • 33%: Rise in SurgoCap Partners' performance last year.
  • 17%: Current return of SurgoCap Partners this year.
  • 8%: Rise in the S&P 500 index this year.
  • 14%: Return of Lee Ainslie's Maverick in the first half of 2025.
  • 20%+ return: Performance of Daniel Sundheim's D1 Capital Partners in the first half of 2025.

Sources:

  • Hedge Fund Research
  • PivotalPath
  • Spencer Platt/Getty Images