Hedge funds experienced a mixed performance in 2025, with many facing losses in July due to short positions on stocks, a situation partly attributed to retail day traders. Trend-following hedge funds reported a 9.6% loss in the first half of the year, positioning them for their worst annual performance since at least 1998. Despite these challenges, hedge fund returns improved in July, buoyed by rising stock markets reaching record highs. However, some funds encountered volatility linked to ongoing U.S. trade uncertainties. In response to earlier trade tensions that unsettled global markets, hedge fund investors have increasingly favored European assets. Additionally, there has been a significant reduction in hedge fund gross exposure, marking the largest unwind since the COVID-19 market crash.