Hedge funds closely tracked moves in equity markets last year, raising concerns among some commentators that the industry may not be positioned to protect investors if there is a sharp market sell-off.
According to research by BNP Paribas, the correlation between hedge fund returns and the MSCI World, a broad global equity market index, was the highest in at least five years.
The research comes amid a roaring three-year bull market in global stocks that helped hedge funds make 12.5 per cent in 2025, their best year since 2009, according to data provider HFR. However, the research also adds to long-standing fears that these high-fee portfolios could struggle to protect investors during a market downturn, traditionally one of their strongest selling points.