ALTERNATIVE MARKETS UPDATE – END NOVEMBER 2025

​The hedge fund industry has entered a period of renewed strength, supported by a powerful combination of rising assets, substantial inflows and solid performance across several core strategies. Global industry assets have climbed to almost five trillion dollars by the third quarter of 2025 according to HFR, marking the eighth consecutive quarterly increase and the strongest accumulation of capital since before the global financial crisis. Inflows have been driven by a clear shift in allocator behaviour. Investors have been repositioning portfolios to cope with conflicting macro signals, ranging from uneven global growth and persistent policy divergence between major central banks to elevated bond market volatility and ongoing geopolitical tensions. With the traditional balance between equities and bonds failing to provide reliable protection in this environment, institutions have been turning to hedge funds as a source of active risk management and diversification.

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RESEARCH PERSPECTIVE VOL. 264 November 2025 Alternative Markets Update The hedge fund industry has entered a period of renewed strength, supported by a powerful combination of rising assets, substantial inflows and solid performance across several core strategies. Global industry assets have climbed to almost five trillion dollars by the third quarter of 2025 according to HFR, marking the eighth consecutive quarterly increase and the strongest accumulation of capital since before the global financial crisis. Inflows have been driven by a clear shift in allocator behaviour. Investors have been repositioning portfolios to cope with conflicting macro signals, ranging from uneven global growth and persistent policy divergence between major central banks to elevated bond market volatility and ongoing geopolitical tensions. With the traditional balance between equities and bonds failing to provide reliable protection in this environment, institutions have been turning to hedge funds as a source of active risk management and diversification. Performance has reinforced this trend. Equity hedge funds were core contributors to the successful performance of the industry over the past years. Our average equity hedge fund returned 14.2% in 2024 and 22.2% in 2025 so far. Multistrategy hedge funds also strongly contributed to the success of the industry, with many of the most well-known hedge funds posing stellar results. This positive perception certainly added to the renewed interest in the industry. Our multistrategy hedge funds returned 6.3% in 2024 and 7.6% in 2025 thus far. Fixed income managers also put in weight in the overall performance of the industry, by managing the challenging rate environment well. Our fixed income strategies returned 6.0% in 2024 with another 7.9% in the current year. Tactical trading strategies faced difficulties in managing the highly uncertainly financial ecosystem. This resulted in 4.7% gains in 2024 and a slight decline of 4.3% in 2025. Figure 1 visualizes these results. Figure 1: Performance of Stone Mountain Capital Strategy Indices & Benchmarks from HFR & HFRI, Sources: Stone Mountain Capital Research, HFR, HFRI, November 2025 Crypto hedge funds delivered a striking divergence in recent performance, with a gain of 78% in 2024 followed by a flat result in 2025, as shown in Figure 1. Digital assets have become significantly more relevant to the broader hedge fund universe, with around half of hedge funds now allocating to crypto in some form, most frequently through derivatives. This marks a major shift in institutional integration and reflects the growing use of crypto markets. What makes this development especially noteworthy is that it comes at a time when the broader crypto environment has been unusually challenging. The market has been characterised by elevated volatility, large outflows from exchange traded funds, widespread liquidation pressure in crypto derivatives and a declining stablecoin supply that has raised concerns about market depth and liquidity conditions. Despite this difficult backdrop, the market has recently shown signs of stabilisation. Since the beginning of October, Bitcoin fell by almost 30% percent before recovering to $91k. Ethereum declined by roughly 37% at its low but has since risen back above $3k. Solana suffered a drawdown of more than 40% but has recovered to around $140. Figure 2 shows more insights into the more challenging ecosystem recently. Figure 2: Indexed Performance of Bitcoin, Ethereum, and Solana Since October 2025, Source: CoinMarketCap, November 2025 STONE MOUNTAIN CAPITAL Stone Mountain Capital is an advisory boutique established in 2012 and headquartered in London with offices Pfaeffikon in Switzerland, Tallinn in Estonia and Dubai and Umm Al Quwain in United Arab Emirates. We are advising 30+ best in class single hedge fund and multi-strategy managers across equity, credit, and tactical trading (global macro, CTAs and volatility). In private assets, we advise 10+ sponsors and general partners across private equity, venture capital, private credit, real estate, capital relief trades (CRT) by structuring funding vehicles, rating advisory and private placements. As of 14th June 2025, Stone Mountain Capital has total alternative Assets under Advisory (AuA) of US$ 62.9 billion. 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