"Is Stock Picking King" Making a Comeback? Strong Returns from Long and Short Equity Funds Attract Capital Inflows for the First Time in a Decade

In the turbulent market of 2025, long-short hedge funds skilled in stock picking are experiencing their first recovery in a decade.

According to the Financial Times, data from Hedge Fund Research shows that long-short equity hedge funds (buying expected strong stocks and shorting weak stocks) achieved a return of 9.2% in the first half of the year, with a monthly return of 3.5% in June, attracting a net inflow of $10 billion in the first half, making it one of the best-performing categories in the hedge fund industry.

Specifically, funds like Chris Hohn's TCI Fund and John Armitage's Egerton Fund both reported returns exceeding 20% as of June this year, while the technology stock fund SurgoCap Partners has also seen a cumulative increase of 17% this year.

The market volatility triggered by Trump's tariff policy in April created a favorable environment for stock-picking strategies. The stock market plummeted after the tariff shock and then rebounded, prompting asset allocators to seek protection beyond broad market indices, driving funds into long-suffering stock-picking funds.

Zlata Gleason, partner and head of client advisory at Indus Capital, stated:

"The market for stock pickers is back."

Long-Short Strategies Back in Favor

Some stock-picking fund managers indicated that the relatively high interest rate environment is finally starting to have a positive effect.

In the decade following the 2008-2009 financial crisis, many fund managers believed that low borrowing costs and central bank buying drove the overall market up, making it difficult to find shorting targets.

Reportedly, a London hedge fund manager noted that investors are now scrutinizing company earnings more rigorously:

"The market is extremely harsh on companies that do not meet performance expectations, creating an excellent environment for stock pickers."

The diversification of stock market returns also provides support. This year, equal-weighted versions of the S&P 500 have kept pace with market-cap-weighted indices, indicating that the market pattern dominated by large U.S. technology stocks for many years is loosening.

European Market Performance Outstanding

According to PivotalPath data, European equity strategies have become the best-performing strategies among all regions this year, with European indices surpassing the S&P 500 for the first time in years amid the turmoil caused by Trump's trade war.

Defense stock funds, such as Germany's Rheinmetall and the UK's BAE, have surged significantly, indicating that investors are refocusing on previously unfavored sectors.

Reportedly, a senior executive at a London hedge fund stated:

"The largest three or four companies in the world no longer dominate index returns; it feels more like a stock picker's market."

Nevertheless, a head of a well-known European family office remains cautious about the sustained recovery of inflows into long-short funds, believing that the performance of such funds has been "unstable" over the past few years.

Risk Warning and Disclaimer

The market carries risks, and investment should be approached with caution. This article does not constitute personal investment advice and does not take into account the specific investment objectives, financial situation, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article are suitable for their specific circumstances Invest based on this, and you bear the responsibility