Why small hedge funds ruled in 2025

Hedge fund managers delivered another strong year in 2025, rewarding investors who poured hundreds of billions of dollars into the industry.Through November, hedge funds gained 10.8% in 2025, according to industry research firm PivotalPath’s composite index, putting the industry on pace to eclipse 2024. Nearly every major strategy posted positive returns.

But it wasn’t the same story as 2024, when large hedge funds led the way to a stellar year for the industry. This year, it’s the small hedge funds that have ruled.Funds managing less than $500 million outperformed their larger peers through November, according to PivotalPath data. The smallest firms — those overseeing less than $100 million — led the pack, returning 14.6%.

PivotalPath chart showing hedge fund performance by AUM

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