Top investors for the first time say they're putting more of their money into quant funds than any other type of hedge fund

By Jules Rimmer Hedge funds on average posted their second consecutive year of double-digit gains in 2025 Hedge funds are getting better at navigating gepolitical turbulence and market volatility A poll of top investors who collectively run over $1 trillion in assets finds they are putting most of their hedge-fund money into so-called quantitative funds that trade based on complex algorithms and machine learning. Quant funds are now the most sought-after category for the first time in its records, a report from Goldman Sachs sales and trading desk found. And it's not necessarily chasing performance - those funds actually underperformed categories last year where humans did the selection, notably long-short funds which combine bets that stocks will appreciate with usually a smaller percentage allocated to betting that stocks will go down. The quant funds also experienced drawdowns of as much as 5% last July. Looking back on a five-year timeline, however, it is quant funds that have fared best with an aggregate return of 10% and a very consistent profile. Multi-strategy funds or 'pod shops' have been among the fastest-growing trends in recent years and they delivered a11.5% return in 2025 after a challenging start. Performance by strategy - annualized averages The survey found it was endowments, foundations, and family offices that are seeking quant and funds that trade based on macroeconomic assessments. "This is particularly notable as it suggests that many of these allocators are now moving toward more of an 'absolute return' orientation for their hedge fund portfolios in favoring uncorrelated strategies over equity L/S, the traditional bedrock of their portfolios (composing about 35% of their hedge fund assets even today)," said the analysts. In 2025 the hedge fund industry managed to carve out its second consecutive year of double-digit gains with a return of 11.8%, following on from the previous 11.9%. Most encouragingly for the asset class, was that last year also brought about the first net inflows for hedge funds in a long while. The current situation contrasts with the difficulties experienced by hedge funds in the 2010s when low interest rates globally suppressed volatility VIX and increased the correlation of returns. -Jules Rimmer This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal. (END) Dow Jones Newswires 01-30-26 1035ET