The hedge fund landscape in 2025 is witnessing a pronounced performance divergence. Systematic trend-following funds—once stalwarts of steady, algorithm-driven gains—are struggling to keep pace in a market environment dominated by political shocks, volatile macroeconomic indicators, and rapid policy reversals. Meanwhile, discretionary macro funds, powered by human judgment and tactical agility, are outperforming their quantitative counterparts, underlining a fundamental shift in which adaptability now trumps automation.
At the heart of the disparity lies the ability—or lack thereof—to respond quickly to increasingly unpredictable market conditions. Since the beginning of the year, systematic funds employing trend-following strategies have suffered significant drawdowns, with returns plunging by double digits for many well-known names. In contrast, macro funds steered by portfolio managers with discretion over asset class selection, trade timing, and risk exposure have delivered positive results, often in high single or double digits.
The contrasting trajectories highlight an essential truth in today’s market dynamics: flexibility and speed are more critical than rigid rule-based trading.
Whipsawed by Market Turbulence
Trend-following hedge funds rely on algorithms that detect and capitalize on price momentum. When markets trend clearly—either upward or downward—these models can ride the wave profitably. However, 2025 has been anything but predictable. Market directions have reversed suddenly and violently, leaving these strategies vulnerable to whipsaws that generate repeated losses.
Notable examples include steep reversals in U.S. Treasury yields, the rapid strengthening and weakening of the Australian dollar, and sharp swings in commodities such as coffee. These shifts have been compounded by political volatility, particularly in the U.S., where decisions from the White House have frequently rattled markets. One such event, the abrupt imposition of new tariffs in April, triggered an aggressive selloff in both European and American equities, erasing months of gains in a matter of days.
Trend funds often require sustained moves to build positions and extract returns. In an environment where trends vanish almost as quickly as they appear, these strategies are left holding losing trades just as market direction flips. Consequently, leading trend-focused funds such as Systematica, Transtrend, and Aspect Capital have reported year-to-date losses in the range of 15% to 19%. For investors seeking steady returns, the promise of algorithmic resilience is wearing thin.
The Rise of the Discretionary Macro Manager
By contrast, discretionary macro hedge funds are thriving in the current environment. These funds are led by seasoned traders and economists who interpret macroeconomic data, central bank policies, geopolitical developments, and market sentiment in real time. Their edge lies not just in insight, but in the ability to pivot quickly as narratives change.
Rokos Capital Management, for example, has delivered a year-to-date return close to 10%, thanks in part to successful bets on interest rate trajectories and currency movements. EDL Capital has reportedly achieved gains north of 20%, taking advantage of cross-asset volatility. Even firms with a mixed strategy, such as Brevan Howard, have seen certain macro strategies outperform even as other internal funds post losses.
The performance differential is rooted in discretionary funds’ capacity to manage risk actively and avoid trades when signals are unclear. Unlike systematic models that must act on every signal, discretionary managers can stay on the sidelines when market noise outweighs clarity. They can hedge, shift regions, rebalance exposures, or reduce leverage in anticipation of political announcements or central bank surprises.
Macro managers have also benefited from increased dispersion across global markets. Diverging monetary policies—particularly between the U.S., Europe, and Asia—have created opportunities to take relative-value positions across currencies, rates, and sovereign debt. These nuances are often beyond the scope of trend algorithms, which tend to rely on more mechanical measures of price action.
Multi-Strategy Models Offer Some Protection
Some hedge fund giants are weathering the storm by balancing systematic and discretionary exposure. Firms like Man Group and AQR Capital Management operate multi-strategy funds that integrate trend-following components with macro, equity, and fixed-income strategies.
Man Group’s AHL Alpha Programme is reportedly down over 10% for the year, in line with the broader trend fund struggles. However, its diversified multi-strategy vehicles have posted gains, buoyed by successful discretionary calls in other asset classes. AQR’s Apex fund has returned over 10%, offering investors access to a broader set of performance drivers. Even within trend strategies, some firms have managed to outperform. AQR’s Helix strategy, while technically a trend fund, has posted a positive year so far due to smart diversification and adaptive parameters.
Graham Capital Management offers another example of internal balancing. Its Multi-Alpha Opportunity fund has delivered gains, while its Tactical Trend product has underperformed. The firm’s founder, Ken Tropin, emphasized the importance of sticking to proven models despite volatility, a philosophy that has kept many trend-focused firms from abandoning their strategies mid-cycle.
Why the Gap Has Widened
The divergence between trend and macro strategies is not a new phenomenon, but 2025 has seen the gap widen in ways that signal deeper structural challenges for algorithm-based investing. One factor is latency: systematic strategies, no matter how fast their execution, often react after a trend has begun. In a market full of head fakes and sudden reversals, this reactive posture can be costly. By the time models confirm a trend, discretionary traders have already moved in—or moved out.
Another challenge is that many trend models are built on historical patterns that no longer reflect the current environment. Markets have become more sensitive to political rhetoric, social media-fueled speculation, and rapid liquidity shifts. Events unfold in minutes or hours rather than days or weeks. Models trained on slower-moving past data may simply be miscalibrated for this new regime.
Meanwhile, macro funds benefit from thematic investing. As global narratives develop—such as a potential U.S.-China decoupling, fragmented monetary responses to inflation, or synchronized energy transitions—discretionary managers can build long-term theses, allocate across asset classes, and stay invested beyond the noise. Trend funds, in contrast, need price confirmation to initiate positions, making them inherently slower and more exposed to whipsaws.
The Future of Trend Funds in a Volatile Era
Despite their recent struggles, trend-following strategies are unlikely to disappear. They still serve a purpose in diversified portfolios, especially during prolonged dislocations or crisis periods when directional trends emerge strongly. Historically, these funds have provided uncorrelated returns and downside protection during market panics.
But in the current environment, investors are clearly favoring agility. The outperformance of discretionary macro funds is driving fresh capital allocations and prompting some trend-focused firms to reconsider their models or introduce hybrid approaches. Some are even integrating machine learning techniques to better distinguish between real trends and noise.
As global uncertainty continues to define financial markets—from central bank signaling to geopolitical shifts—hedge funds will be judged not just on their algorithms or insights, but on their adaptability. The winners in 2025 are those who can pivot quickly, manage risk dynamically, and capitalize on complexity rather than be overwhelmed by it. Trend funds, for all their historical success, may need to evolve faster if they are to remain competitive in this new era of high-frequency macro surprises.
(Source:www.reuters.com)
At the heart of the disparity lies the ability—or lack thereof—to respond quickly to increasingly unpredictable market conditions. Since the beginning of the year, systematic funds employing trend-following strategies have suffered significant drawdowns, with returns plunging by double digits for many well-known names. In contrast, macro funds steered by portfolio managers with discretion over asset class selection, trade timing, and risk exposure have delivered positive results, often in high single or double digits.
The contrasting trajectories highlight an essential truth in today’s market dynamics: flexibility and speed are more critical than rigid rule-based trading.
Whipsawed by Market Turbulence
Trend-following hedge funds rely on algorithms that detect and capitalize on price momentum. When markets trend clearly—either upward or downward—these models can ride the wave profitably. However, 2025 has been anything but predictable. Market directions have reversed suddenly and violently, leaving these strategies vulnerable to whipsaws that generate repeated losses.
Notable examples include steep reversals in U.S. Treasury yields, the rapid strengthening and weakening of the Australian dollar, and sharp swings in commodities such as coffee. These shifts have been compounded by political volatility, particularly in the U.S., where decisions from the White House have frequently rattled markets. One such event, the abrupt imposition of new tariffs in April, triggered an aggressive selloff in both European and American equities, erasing months of gains in a matter of days.
Trend funds often require sustained moves to build positions and extract returns. In an environment where trends vanish almost as quickly as they appear, these strategies are left holding losing trades just as market direction flips. Consequently, leading trend-focused funds such as Systematica, Transtrend, and Aspect Capital have reported year-to-date losses in the range of 15% to 19%. For investors seeking steady returns, the promise of algorithmic resilience is wearing thin.
The Rise of the Discretionary Macro Manager
By contrast, discretionary macro hedge funds are thriving in the current environment. These funds are led by seasoned traders and economists who interpret macroeconomic data, central bank policies, geopolitical developments, and market sentiment in real time. Their edge lies not just in insight, but in the ability to pivot quickly as narratives change.
Rokos Capital Management, for example, has delivered a year-to-date return close to 10%, thanks in part to successful bets on interest rate trajectories and currency movements. EDL Capital has reportedly achieved gains north of 20%, taking advantage of cross-asset volatility. Even firms with a mixed strategy, such as Brevan Howard, have seen certain macro strategies outperform even as other internal funds post losses.
The performance differential is rooted in discretionary funds’ capacity to manage risk actively and avoid trades when signals are unclear. Unlike systematic models that must act on every signal, discretionary managers can stay on the sidelines when market noise outweighs clarity. They can hedge, shift regions, rebalance exposures, or reduce leverage in anticipation of political announcements or central bank surprises.
Macro managers have also benefited from increased dispersion across global markets. Diverging monetary policies—particularly between the U.S., Europe, and Asia—have created opportunities to take relative-value positions across currencies, rates, and sovereign debt. These nuances are often beyond the scope of trend algorithms, which tend to rely on more mechanical measures of price action.
Multi-Strategy Models Offer Some Protection
Some hedge fund giants are weathering the storm by balancing systematic and discretionary exposure. Firms like Man Group and AQR Capital Management operate multi-strategy funds that integrate trend-following components with macro, equity, and fixed-income strategies.
Man Group’s AHL Alpha Programme is reportedly down over 10% for the year, in line with the broader trend fund struggles. However, its diversified multi-strategy vehicles have posted gains, buoyed by successful discretionary calls in other asset classes. AQR’s Apex fund has returned over 10%, offering investors access to a broader set of performance drivers. Even within trend strategies, some firms have managed to outperform. AQR’s Helix strategy, while technically a trend fund, has posted a positive year so far due to smart diversification and adaptive parameters.
Graham Capital Management offers another example of internal balancing. Its Multi-Alpha Opportunity fund has delivered gains, while its Tactical Trend product has underperformed. The firm’s founder, Ken Tropin, emphasized the importance of sticking to proven models despite volatility, a philosophy that has kept many trend-focused firms from abandoning their strategies mid-cycle.
Why the Gap Has Widened
The divergence between trend and macro strategies is not a new phenomenon, but 2025 has seen the gap widen in ways that signal deeper structural challenges for algorithm-based investing. One factor is latency: systematic strategies, no matter how fast their execution, often react after a trend has begun. In a market full of head fakes and sudden reversals, this reactive posture can be costly. By the time models confirm a trend, discretionary traders have already moved in—or moved out.
Another challenge is that many trend models are built on historical patterns that no longer reflect the current environment. Markets have become more sensitive to political rhetoric, social media-fueled speculation, and rapid liquidity shifts. Events unfold in minutes or hours rather than days or weeks. Models trained on slower-moving past data may simply be miscalibrated for this new regime.
Meanwhile, macro funds benefit from thematic investing. As global narratives develop—such as a potential U.S.-China decoupling, fragmented monetary responses to inflation, or synchronized energy transitions—discretionary managers can build long-term theses, allocate across asset classes, and stay invested beyond the noise. Trend funds, in contrast, need price confirmation to initiate positions, making them inherently slower and more exposed to whipsaws.
The Future of Trend Funds in a Volatile Era
Despite their recent struggles, trend-following strategies are unlikely to disappear. They still serve a purpose in diversified portfolios, especially during prolonged dislocations or crisis periods when directional trends emerge strongly. Historically, these funds have provided uncorrelated returns and downside protection during market panics.
But in the current environment, investors are clearly favoring agility. The outperformance of discretionary macro funds is driving fresh capital allocations and prompting some trend-focused firms to reconsider their models or introduce hybrid approaches. Some are even integrating machine learning techniques to better distinguish between real trends and noise.
As global uncertainty continues to define financial markets—from central bank signaling to geopolitical shifts—hedge funds will be judged not just on their algorithms or insights, but on their adaptability. The winners in 2025 are those who can pivot quickly, manage risk dynamically, and capitalize on complexity rather than be overwhelmed by it. Trend funds, for all their historical success, may need to evolve faster if they are to remain competitive in this new era of high-frequency macro surprises.
(Source:www.reuters.com)