Key facts
- Hedge funds are expected to be the most popular asset class for the rest of 2026.
- Investors plan to allocate more capital to hedge funds.
- 60% of investors are picking new fund managers over more experienced ones.
- Hedge funds were up 5.5% this year through July.
- Stock-picking funds are expected to see the highest sentiment through the remainder of 2026.
Hedge funds are set to attract increased investor capital through the end of 2026, marking the first time in three years that the industry has raised more funds than initially planned, according to a Bank of America report reviewed by Reuters. The strong performance in the first half of the year, with hedge funds up 5.5% through July, has fueled this trend, despite a July selloff in AI stocks that impacted some prominent funds.
Investors, including pension funds, investment vehicles, and private banks, are showing a heightened interest in allocating more capital to hedge funds. According to a survey of 321 asset allocators by Bank of America's global markets capital strategy group, equity and multi-manager platforms within hedge funds have seen the highest demand. Popular sectors for investment include technology, media and telecommunications, healthcare, and energy.
Vanessa Bogaardt, Bank of America's global head of capital strategy group and consulting services, prime financing, noted that 60% of investors are opting for new fund managers over more experienced ones, a shift not always seen in the past. Sentiment is particularly high for stock-picking funds for the remainder of 2026. In contrast, private credit funds are facing less bullish sentiment due to concerns about opaque valuations, redemption pressures, and exposure to the AI-disrupted software industry.