CANOE 2025 HEDGE FUND PERFORMANCE REPORT:

The VIP Index: Performance Data the Benchmarks Miss

 

Introducing Canoe’s Hedge Fund VIP Index

The Canoe Hedge Fund VIP Index was built to answer a question traditional databases cannot: how have the largest, most established hedge funds actually performed?

Most hedge fund benchmarks are constructed from voluntary manager submissions. The funds most likely to report are those actively raising capital. The funds least likely to report are the largest and most successful ones, with no marketing incentive and every reason to keep performance private. The result is an index shaped more by who participates than by where institutional capital actually sits. This is contribution bias, and it systematically skews published benchmarks toward smaller, fundraising-mode managers.

The implication is significant. The funds that dominate institutional hedge fund allocations, the multi-manager platforms, the quant giants, the global macro legends managing tens to hundreds of billions, are largely absent from conventional benchmarks. Allocators making decisions about these managers have had no credible, aggregated performance reference point. Until now, the only way to benchmark a portfolio heavily allocated to the largest funds was to approximate from incomplete data or rely on what managers chose to share directly.

Canoe’s position changes that. Our platform processes performance data directly from capital account statements, investor letters, and fund reports as GPs report to LPs across 500+ institutional clients and 18,000+ LPs. Performance in this index is calculated from actual LP balances and transactions, net of all fees. Not from what managers choose to publish. Every fund carries a complete monthly return series, verified individually, with any fund missing data for a given period excluded entirely. 

The result is a contribution-bias-free index covering the 100 largest hedge funds by AUM, representing approximately $3 trillion in institutional allocations across 2023–2025. The managers in this universe average an estimated $28 billion in hedge fund AUM and span the full spectrum of institutional hedge fund strategies: multi-manager platforms, quantitative funds, global macro, equity long/short, and relative value and arbitrage. It is, in practical terms, a cross-section of the firms that define the industry.

Note: AUM figures represent estimates sourced from publicly available information across various dates and should be considered approximations.

This index does not exist anywhere else. The data has always been there, distributed across thousands of LP documents. Canoe is the first platform with the network scale to aggregate it.

Monthly VAMI (Value Added Monthly Index) indices represent fund-weighted performance, calculated from actual balances and transactions, not survey submissions. All figures cover the period January 2023 through December 2025.

FINDING #1: 

HF VIPs delivered competitive returns with meaningfully lower risk

What the data shows:

The Total Canoe Hedge Fund VIP Index, returned 10.2% annualized over the past three years, or 34% cumulative. The VIP Index trailed the broader hedge fund index by 56 basis points annualized, and both indices underperformed the S&P 500 (at 60% exposure) on an absolute basis. On a risk-adjusted basis, however, the picture shifts:

Three-Year Sharpe Ratios (assuming 4% risk-free rate):

• S&P 500 at 60% Exposure: 1.32 
• HF Index: 1.42
• HF VIP: 1.69

Maximum drawdown over the period tells a similar story: VIP funds drew down a maximum of only 1.8% compared to 3.2% for the total HF index and 5.0% for the adjusted S&P benchmark.

 

Why this matters:

Institutional investors don’t optimize for raw returns in isolation. They optimize for risk-adjusted performance, capital preservation, and portfolio stability especially during turbulent markets. The VIP Index reflects what those allocators have actually experienced: competitive returns with considerably less volatility than the broader universe. For most institutional portfolios, that tradeoff is the point.

A note on methodology: The fund universe reflects actual institutional allocations and is subject to both selection and survivorship bias. Selection bias, the tendency for institutional portfolios to favor established, higher-quality managers, is the dominant factor. Survivorship bias, where underperforming funds may have liquidated over the period, is also present to a degree. This means the index likely reflects better-than-average hedge fund performance rather than a pure industry average. However, this characteristic also makes it more representative of the actual returns experienced by institutional allocators, which is the relevant benchmark for most users of this data.

 

FINDING #2: 

VIP Multi-Manager Platforms outperformed on capital preservation

What the data shows:

Over the past three years, multimanager platforms have shown to be extremely effective at capital preservation, navigating market volatility with minimal drawdowns and quick recoveries. The group showed the lowest drawdown profiles of any segment analyzed including VIP Quants and Arbitrage strategies.  

The monthly drawdown shows that during the two main periods of market volatility, and three smaller ones. VIP multi-manager platforms protected capital in all periods. During the two primary volatility events analyzed, the contrast with the broader market was stark:

• October 2023 Drawdown: S&P 500 Adj. BM: -5.0% | HF VIP Index: -3.0% | Multi-Manager VIP: 0.0%
• April 2025 Drawdown: S&P 500 Adj. BM: -4.5% | HF VIP Index: -2.7% |Multi-Manager VIP: -0.5%

In the spring of 2023 episode, only 3 of the 15 platforms in the index posted negative returns. In the more recent spring 2025 volatility, 11 of the 15 were negative, yet the group’s average drawdown was just 50 basis points. Recovery across both periods was rapid. 

 

Why this matters:

Size and structure have real advantages. Large multi-manager platforms have built risk mitigation strategies to better absorb sector-level or strategy-level dislocations without material portfolio impact. Each pod carries a different return profile and a different relationship to broader market movements, and when platforms dynamically shift capital toward what’s working, gains and losses across pods appear to partially cancel each other out. Only when conditions deteriorate sharply enough to move all pods in the same direction simultaneously does the index draw down at all. For allocators whose primary mandate includes capital protection, this is exactly the behavior the data validates. Even when these platforms do draw down, the downside is contained. 

 

FINDING #3: 

VIP Multi-Manager outpaced smaller counterparts, trail the broader VIP Index

What the data shows:

VIP Multi-Manager platforms returned 9.4% annualized over the three-year period, outperforming smaller platforms and multi-strategy funds (7.7% annualized) while falling modestly short of the total VIP index (10.2% annualized). On a risk-adjusted basis, the picture is more favorable: VIP multi-managers produced strong Sharpe ratios relative to their smaller counterparts, driven by the lower volatility profile highlighted in Finding #2.

 

Why this matters:

Scale is a competitive advantage in multi-manager structures. Capital spread across a larger number of pods creates a more efficient risk/reward profile. The data suggests that larger platforms are capturing the diversification benefit of their size, even if absolute return lags some other VIP strategies. For allocators prioritizing consistency and downside protection over maximizing upside, this positioning is intentional, and shows up in the data. 

 

FINDING #4: 

In relative value and arbitrage, size works against you

What the data shows:

VIP Relative Value and Arbitrage funds are the one segment where smaller funds outperformed their larger counterparts on an absolute basis: 

• VIP RV/ARB: 6.0% return, 1.4% annualized volatility
• Broad RV Index: 8.0% return, 2.6% annualized volatility  

The VIP RV funds produced lower returns with lower volatility. Smaller funds captured more of the upside while accepting more volatility to do it.

 

Why this matters:

Relative value and arbitrage strategies are fundamentally about speed and agility. These strategies exploit pricing inefficiencies that can close in hours or days. At scale, executing quickly enough to capture those opportunities becomes structurally harder. Larger positions create market impact. More complex approval chains slow decision-making. The data implies that for this strategy type specifically, a leaner fund can outmaneuver a larger one. Allocators evaluating RV exposure may find the smaller-fund universe delivers more of the return profile they’re seeing.

 

Conclusion: What the VIP Index tells you that no other source can

The hedge fund indices published by traditional data aggregators reflect the funds that choose to be visible. The Canoe VIP Index reflects the funds that actually move institutional capital.

These are different datasets, with different implications.

What this analysis shows, across three years and approximately $3 trillion in institutional allocations, is a coherent picture of how the world’s largest hedge funds have actually performed. Returns in line with the broader universe. Meaningfully lower volatility. Superior capital protection in stress periods. And a nuanced divergence by strategy, where scale amplifies advantages in multi-manager structures but constrains returns in relative value and arbitrage.

For allocators focused on manager selection, portfolio construction, or hedge fund exposure sizing, these findings offer a baseline that hasn’t previously been available. Not because the data didn’t exist, but because it was distributed across thousands of LP documents that no one had aggregated.

Canoe now has. And we will update this analysis quarterly as the next chapter of hedge fund performance unfolds.

 

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About Canoe Intelligence

Canoe Intelligence (“Canoe”) is the platform for smarter alts management. We redefine alternative investment intelligence with AI-driven software that directly addresses the core challenges of private markets. Our technology empowers institutions, LPs, and wealth managers to future-proof their alts infrastructure, modernizing systems and providing a scalable foundation for long-term growth and compliance. By automating manual data processing with AI-native precision, Canoe helps clients reduce operational costs and risks, significantly lowering overhead and mitigating errors. Ultimately, our timely, accurate, and comprehensive data enables investment teams to drive superior investment outcomes through deeper insights and more profitable allocation strategies. With Canoe, it’s all about making Alts, smarter. 

Learn more at www.canoeintelligence.com.