D.E. Shaw's flagship funds trump market volatility to beat S&P 500 in 2025, source says

By Ateev Bhandari and Nell Mackenzie

Jan 2 (Reuters) - Investment firm D.E. Shaw's two flagship funds beat the benchmark S&P 500 .SPX index in 2025, a source familiar with the matter told Reuters on Friday, reflecting similar strength seen across hedge fund peers during a year of record volatility.

Its Oculus fund, its second largest, generated a net return of around 28.2% for the year and has made a net annualized return of 14.4% since its founding in 2004, the source said.

The firm's Composite fund, its largest, made a net return of around 18.5%, with an annualized net return of 12.9% since inception in 2001, the person said.

The benchmark index ended 16.4% higher this year, as it went from record highs in mid-February, to near bear-market lows in early April, and then to fresh record highs in December.

The volatility - fueled largely by U.S. President Donald Trump's whiplash trade, fiscal and geopolitical policies - helped trading desks across Wall Street reap profits as active portfolio shuffling created price arbitrage.

In a research note released earlier last year, D.E. Shaw pointed to "supply-demand imbalances" in the cost of instruments used by investors to hold shares of S&P 500 companies.

The results align with peers, as Reuters reported last month that Bridgewater Associates posted the highest profits in its 50-year history.

Billionaire investor Cliff Asness's AQR Capital Management made annual gains of 19.6% in its multi-strategy Apex Strategy and 18.6% in its alternative trend-following Helix Strategy, another source told Reuters on Friday.

Founded in 1988, D.E. Shaw managed more than $85 billion as of December 1 across hedge funds, private markets, multi-asset class and active equity investment strategies.

Its Oculus fund is yet to have a negative year, while Composite has had just one since inception, the source told Reuters.