Long-Short Hedge Funds Attract $10B After Years of Outflows

Stock-picking hedge funds are staging a comeback amid this year’s market turbulence, posting strong returns that have helped reverse a near decade-long trend of investor outflows.

Equity long-short funds — which aim to profit by taking long positions in stocks expected to rise and shorting those likely to fall — attracted $10 billion in new capital during the first half of 2025, according to data from Hedge Fund Research.

After nine consecutive years of redemptions, driven by disappointing performance and failure to protect investors during downturns such as the steep equity sell-off in 2022, these funds are beginning to regain investor confidence, despite their traditionally high fees.

Once a dominant segment of the hedge fund industry, long-short strategies had been eclipsed in recent years by large multi-manager platforms that diversify across various investment styles. However, the heightened volatility in 2025 — particularly the sharp market drop triggered by President Donald Trump’s “liberation day” tariff announcement in April, followed by a rebound — has created favorable conditions for active stock selection.

According to PivotalPath, long-short hedge funds returned 3.5% in June and 9.2% over the first half of the year, ranking among the top performers in the industry. -Chart from FT