Despite the broader hedge fund industry gaining 1.3% over the opening 10 weeks of the year, macro-focused funds like EDL Capital have accelerated their earnings to 17% over the same period, marking significant outperformance. So what’s driving this impressive start to 2025? 

EDL Capital is known for its global macro strategy, and unlike stock-heavy hedge funds, it focuses on tracking macroeconomic trends and trading currencies and bonds based on market movements. It’s this strategy that’s helped the fund overcome the volatility of choppy Q1 markets and thrive on geopolitical uncertainty. 

The impressive double-digit growth of macro hedge funds like EDL Capital points to a wider shift in the institutional investment landscape, where stock-picking funds have continually struggled to secure growth amid market uncertainty over the first quarter of 2025. 

Market circumstances have become considerably more challenging in 2025, owing to a series of fresh geopolitical concerns and macroeconomic pressures caused by fears over trade wars and growing competition from China that threatens the dominance of Wall Street’s AI boom. 

On March 7, 2025, hedge fund stock pickers and mult-strategy funds gave up around half their average yearly gains amid widespread tech-driven equity sell-offs, according to a Goldman Sachs note. 

In the days that followed, Goldman Sachs cut its year-end forecast for the S&P 500 to 6,200, down from the 6,500 projected at the beginning of the year. With the index at 5,600 at the beginning of Q2 2025, the investment bank’s revised forecasts show muted growth for the year ahead amid wider economic uncertainty. 

It’s for this reason that macro hedge funds could continue their impressive start to the year. But what’s driving their strong returns? And could funds like EDL Capital sustain their double-digit gains throughout the year? 

Benefiting from Volatility

So, why are macro hedge funds enjoying a relatively strong start to 2025? The answer lies in shifting macroeconomic trends and identifying fleeting opportunities amid market volatility. 

Macro managers can also be tactile when it comes to reducing positions in losing trades. They can avoid less liquid credit than other non-liquid investments, with lower participation risk as part of crowded trades. These characteristics improve the trading flexibility of macro hedge funds, allowing managers to take positions throughout global asset classes and sectors. 

Crucially, these strategies have historically outperformed diversified hedge fund benchmarks during times of higher interest rate volatility, with uncertain GDP growth and inflation data capable of producing wider swings in US yields and supporting the potential of macro hedge funds. 

Given the proliferation of artificial intelligence and the availability of data and information at the disposal of traders, changes in investment markets can be undermined by the performance of artificial intelligence algorithms, wiping out short-term trading opportunities for users relying on the same AI tools. 

Adopting a globally-focused macro approach, which prioritizes a 60 to 90-day correlation cycle, can help fund managers beat algorithms by gaining a more fundamental understanding of what causes these correlations and how they may be liable to swing to the upside or downside in the near future. 

Market Hedges in a Downturn

Although market uncertainty is likely to persist throughout 2025, macro hedge funds were among the strongest performers over the past year, highlighting the high potential for earnings through adopting a macro-focused outlook. 

While many funds failed to keep up with the S&P 500’s rate of growth in 2024, a handful of funds were able to beat the benchmark index over the past year. 

Notably, macro hedge funds Discovery Capital and Oculus led the way for 2024’s best performers, posting growth of 52% and 36%, respectively, thanks to gains made across equities, currencies, credit, and rates. 

The only fund to come close to the same level of macro outperformance was Bridgewater Capital’s China fund, which grew 35% in 2024 off the back of the Asian economy’s stock market rally fuelled by the rollout of government stimulus. 

Should interest rates continue to fall alongside a stagnant S&P 500 in 2025, we could see macro hedge funds serve as a strong market hedge over the months ahead for investors. 

Challenges in traditional portfolio diversification could highlight the importance of adopting alternative strategies that are uncorrelated to conventional assets. Long and short equity strategies can discover growth opportunities among sector and stock-specific divergences. 

Macro strategies can outperform benchmarks during periods of inflation and volatility. Given that tariffs are inflationary by nature, this could lead to an effective hedge against weaker performance across broader markets. 

For hedge funds seeking to build their exposure to macro-opportunities, it’s worth adopting a more globally-focused approach, with prime brokers like 26 Degrees Global Markets able to assist.

Preparing for Volatility

The clouded geopolitical and macroeconomic outlook is showing no signs of clearing amid threats of trade wars, foreign policy shifts, and stubborn inflation rates. However, macro hedge funds are looking to thrive amid wider market uncertainty to take advantage of fleeting opportunities prompted by volatility. 

Although 2025 remains uncertain, it plays into the hands of macro hedge funds. In looking more to macro opportunities, we may see institutions broaden their profit margins over the year ahead. Embracing volatility appears to be the most sustainable means of navigating a challenging market environment for the months ahead.