The 130/30 trade strategy has made a strong comeback, with assets climbing to approximately $153 billion as of early 2026. This recovery is notable, especially after facing a turbulent period in 2024 characterized by high volatility and rising interest rates that led many investors to withdraw their funds.
A 130/30 strategy allows managers to invest 130% long in favored stocks while shorting 30% of their least favored stocks. This structure maintains a net exposure of 100%, similar to traditional funds, but enables managers to convey their perspective on both bullish and bearish market conditions.
This investment approach gained traction among institutional investors searching for a middle ground to access short-selling opportunities without the higher costs and restrictions associated with full hedge funds. While such strategies can perform well under favorable market conditions, they also amplify losses during downturns due to their leverage.
During 2024, the hedge fund sector faced considerable challenges, not due to a singular catastrophic event, but from a wave of market volatility and increased interest rates, impacting returns across the board. Particularly, active-extension strategies suffered greatly, as their inherent leverage exacerbated the downturn. In spite of this, the hedge fund industry rebounded quicker than anticipated. According to Goldman Sachs Prime Services, hedge funds collectively saw average returns of 11.9% in 2024 and maintained similar performance into 2025. This is a substantial improvement, outperforming traditional 60/40 stock-and-bond portfolios over the same timeframe.
By the end of 2024, 130/30 strategies had increased their share, managing to hold 85% of the total global active-extension assets. As markets steadied heading into 2025, investor confidence returned, facilitating a significant inflow of capital. The rise to $153 billion in assets signifies not merely a recovery but a validation for the managers who sustained their strategies throughout the market's tribulations.