The figures are an example of the "all-weather" aspect of hedge funds in their ability to profit from significant market shifts, as shown now by the dramas in the Gulf.

Hedge fund performance gains accelerated through February, again driven by macro and equity hedge strategies. Market volatility continued against a geopolitically challenging background ahead of the military clashes in the Gulf.

Extending the trend from the fourth quarter of last year and in January 2026, hedge funds had to navigate heightened risk-on and risk-off volatility in February. For example, thoughts that AI would hit parts of the financial services industry – such as brokerages – roiled the equity market, particularly in the US. 

A report by Hedge Fund Research found that its HFRI Fund Weighted Composite Index® (FWC) rose by 1.9 per cent in February from the previous month and is up 4.38 per cent so far this year. This was the 10th straight month of performance gains, led by trend-following and commodity macro funds, as well as energy and healthcare equity hedge funds.

“Financial market risk sentiment oscillated between risk on and off throughout February, before ending the month on a strong risk off trend that accelerated into early March,” Kenneth J Heinz, president of HFR, said. 

“Geopolitical risk has surged to a historic level and hedge funds are actively navigating an unprecedented spike in financial market volatility and dramatic dislocations through the first week of March, which may not only continue but accelerate based on the developments and evolution of the military conflict in Iran,” Heinz said. 

His comments bear out predictions made by BlackRock late in February in its 2026 Institutional Investment Directions study. BlackRock said: “The market developments of 2025 – shaped by structural trends (or ‘mega forces’) such as artificial intelligence (AI) and geopolitical fragmentation – have underscored a profound rise in uncertainty. As a result, it has become far more challenging to anchor strategic asset allocation (SAA) decisions around a single, long-term starting point scenario.”
 

Macro

HFR said its HFRI Macro (Total) Index advanced 3.0 per cent in February, following a January gain of 4.15 per cent which was the strongest monthly return for the index since May 2003. 

Equity hedge funds, which invest long and short across specialized sub-strategies, also posted strong gains. The HFRI Equity Hedge (Total) Index rose 2.35 per cent in February, driven by a range of energy, healthcare and fundamental exposures. 

Another gain was in fixed income-based, interest rate-sensitive strategies. The HFRI Relative Value (Total) Index returned 0.7 per cent for the month.

Event-driven strategies benefited from expected merger and acquisition events that create the price moves that funds can exploit. 

The HFRI Event-Driven (Total) Index gained 0.3 per cent for the month, led by the HFRI ED: Distressed Index, which returned 1.9 per cent, and the HFRI ED: Special Situations Index, which added 0.9 per cent.