Key facts
- Global hedge funds achieved an average return of 7% in the first half of the year.
- This performance is significantly above the 10-year average of 4.1%.
- Nearly 50% of surveyed investors plan to increase their hedge fund exposure in the latter half of 2026.
- Equity long/short funds were a standout strategy, generating average returns of 17.7% in the first half.
- Hedge funds have consistently outperformed the 60/40 portfolio benchmark over the last five years.
Global hedge funds are on track for a strong performance this year, potentially exceeding returns from 2025, largely due to the artificial intelligence boom that boosted first-half results across most investment strategies. According to a Goldman Sachs note, hedge funds returned an average of 7% in the first six months of the year, significantly higher than the 10-year average of 4.1% and only surpassed during the volatile market conditions of 2020 and 2021.
This marks the sixth consecutive half-year period where hedge fund returns have outpaced their long-term average. Despite a strong performance in risk assets, including a rally in equities that contributed 5.7% to a 60/40 portfolio, hedge funds continued to demonstrate outperformance. Investor demand for hedge funds has also surged, with a Goldman Sachs survey of 341 allocators overseeing over $1.5 trillion revealing that nearly half plan to increase their hedge fund exposure in the second half of 2026, while only 3% expect to reduce it. This net demand has reached a record high.
Institutional investors reported average hedge fund portfolio returns of 7.3% in the first half, while private capital investors saw returns of 8.8%. For the first time in five years, every major hedge fund strategy attracted new capital, with quantitative and multi-strategy funds experiencing particularly strong inflows. The asset management industry continues to outperform the traditional 60/40 portfolio, with hedge funds showing an annual outperformance of approximately 250 basis points over the past five years, indicating a favorable environment for generating alpha. Equity long/short funds were particularly successful, delivering average gains of 17.7% in the first half, benefiting from strong stock-picking opportunities amid significant divergence in individual stock performances.