NEW YORK CITY, New York: An AI-driven stock market rally and heightened volatility helped propel many of the world's most significant hedge funds to substantial gains in 2025, with leading multi-manager firms mainly delivering double-digit returns.

Funds run by D.E. Shaw, Balyasny Asset Management, Bridgewater Associates, and Point72 Asset Management benefited from buoyant equity markets and sharp swings across asset classes, according to people familiar with the matter.

D.E. Shaw's two flagship funds produced double-digit returns in 2025, a source told Reuters, mirroring gains across many of its multi-strategy peers during a year marked by record volatility.

The firm's Oculus Fund generated a net return of around 28.2 percent for the year and has posted a net annualized return of 14.4 percent since its founding in 2004, the source said. D.E. Shaw's Composite Fund, its largest multi-strategy vehicle, delivered a net return of about 18.5 percent, with an annualized net return of 12.9 percent since its inception in 2001.

Founded in 1988, D.E. Shaw managed more than US$85 billion as of December 1 across hedge funds, private markets, multi-asset-class, and active equity investment strategies.

Balyasny, co-founded in 2001 by Dmitry Balyasny, posted gains of 16.7 percent in 2025, while Point72 Asset Management, founded by billionaire investor Steve Cohen, produced a return of 17.5 percent, according to two people familiar with the figures.

Multi-manager hedge funds broadly enjoyed a strong year, aided primarily by robust performance in U.S. equities, which were buoyed by enthusiasm for artificial intelligence-related stocks.

Managers also benefited from U.S. President Donald Trump's trade wars, which injected volatility into bond and currency markets. Large global macro hedge funds typically invest across stocks, bonds, currencies, and commodities, allowing them to capitalise on sharp market moves.

"Overall, it has been a strong year for hedge funds across strategies, with decent alpha generation and recognition from allocators," said Vanessa Bogaardt, global head of capital introduction, prime financing at Bank of America.

"Hedge fund assets are at all-time highs, supported by net inflows into the industry. Allocator sentiment toward hedge funds remains positive, and we see plenty of opportunities to explore in 2026," she added.

The benchmark S&P 500 rose about 16 percent last year, swinging from record highs in mid-February to near bear-market lows in early April before climbing to fresh peaks in December. The turbulence, primarily driven by Trump's shifting trade, fiscal, and geopolitical policies, created opportunities for active traders to exploit price dislocations.

Bridgewater Associates, founded by billionaire Ray Dalio and now led by CEO Nir Bar Dea, posted the highest profits in its 50-year history. Its flagship Pure Alpha fund surged 34 percent in 2025, leading the pack of significant multi-strategy funds operating so-called pod shop models, where teams of traders run strategies across multiple asset classes.

Billionaire investor Cliff Asness' AQR Capital Management also delivered solid results. Its multi-strategy Apex Strategy gained 19.6 percent in 2025, while its alternative trend-following Helix Strategy returned 18.6 percent, another source said.

Not all major players kept pace. Some firms, including Millennium Management and Citadel, lagged their largest peers after being weighed down in the first half of the year by the impact of the Trump administration's trade policies.

Millennium gained 10.5 percent during the year, while Citadel's flagship Wellington fund posted a 10.2 percent return, according to two sources. Citadel's long-term annualized net return since its inception in 1990 stands at about 19 percent, one source said.