Key Takeaways
- • Trend-following hedge funds and CTAs posted losses throughout Q1 2025, with March marking another difficult month that capped a "dismal first quarter" for the sector.
- • Trend-following strategies, which rely on algorithmic models to identify and capitalize on price momentum across markets, have struggled in choppy market conditions characterized by whipsaws and trend reversals.
- • The broader hedge fund industry achieved its tenth consecutive quarter of positive returns in Q1 2025, indicating that losses were concentrated in the trend-following segment rather than reflective of sector-wide weakness.
- • Named firms experiencing Q1 losses included Dmitry Balyasny's $33 billion firm (down 4.3% in March, year-to-date loss of 3.8%) and Michael Gelband's ExodusPoint, highlighting concentration of underperformance among major players.
- • Trend-following underperformance stands in sharp contrast to multi-strategy hedge funds, which delivered strong returns during the same period.
Summary
Trend-following hedge funds and commodity trading advisors (CTAs) endured significant losses throughout the first quarter of 2025, with March delivering another punishing month that sealed what Connect Money characterized as a "dismal first quarter" for the sector. The underperformance reflects the structural challenges these systematically-driven strategies face in volatile, choppy markets where price trends fail to persist and algorithmic models encounter repeated whipsaws.
Trend-following strategies operate by deploying algorithmic models to identify price trends across financial markets with the expectation that upward-trending markets will continue to rally and downward-trending markets will continue declining. When markets move sideways or experience rapid reversals—as occurred in early 2025—these momentum-based approaches generate losses as their signal-detection mechanisms fail to capture sustained directional moves. The sector's Q1 weakness represents a departure from broader hedge fund performance, which achieved positive returns for the tenth consecutive quarter.
Among named underperformers, Dmitry Balyasny's firm—managing $33 billion in assets—declined 4.3% in March alone, bringing its year-to-date loss to 3.8%. Michael Gelband's ExodusPoint also experienced losses during the quarter. These losses occurred despite the broader hedge fund industry posting weighted average positive returns, underscoring that underperformance was concentrated among trend-following and systematic managers rather than indicative of sector-wide distress.
In contrast, multi-strategy hedge funds delivered strong returns during Q1 2025, suggesting that diversified approaches and discretionary management outperformed pure systematic trend-following strategies. The divergence highlights the importance of strategy selection and portfolio positioning during periods of elevated market volatility and trend uncertainty. For institutional investors with exposure to trend-following allocations, the Q1 results underscore the cyclical nature of momentum-based strategies and their sensitivity to market regime shifts.
Trend-following strategies operate by deploying algorithmic models to identify price trends across financial markets with the expectation that upward-trending markets will continue to rally and downward-trending markets will continue declining. When markets move sideways or experience rapid reversals—as occurred in early 2025—these momentum-based approaches generate losses as their signal-detection mechanisms fail to capture sustained directional moves. The sector's Q1 weakness represents a departure from broader hedge fund performance, which achieved positive returns for the tenth consecutive quarter.
Among named underperformers, Dmitry Balyasny's firm—managing $33 billion in assets—declined 4.3% in March alone, bringing its year-to-date loss to 3.8%. Michael Gelband's ExodusPoint also experienced losses during the quarter. These losses occurred despite the broader hedge fund industry posting weighted average positive returns, underscoring that underperformance was concentrated among trend-following and systematic managers rather than indicative of sector-wide distress.
In contrast, multi-strategy hedge funds delivered strong returns during Q1 2025, suggesting that diversified approaches and discretionary management outperformed pure systematic trend-following strategies. The divergence highlights the importance of strategy selection and portfolio positioning during periods of elevated market volatility and trend uncertainty. For institutional investors with exposure to trend-following allocations, the Q1 results underscore the cyclical nature of momentum-based strategies and their sensitivity to market regime shifts.
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