Active hedge fund managers are entering a market environment in 2026 that strongly favours skill-based returns over passive exposure, according to alternative investment firm Evanston Capital Management’s latest annual Hedge Fund Outlook.
Evanston, which manages more than $4.3bn in assets, said rising dispersion, episodic dislocations and uneven liquidity conditions are creating fertile ground for hedge fund strategies capable of generating alpha independent of broader market direction.
“The environment strongly favours active management over passive—extracting value from dispersion and identifying specific pockets of dislocation rather than riding broad market beta,” said Adam Blitz, co-founder and co-chief investment officer at Evanston Capital.
The annual report assesses prospects across four core hedge fund strategies: long-short equity, event driven, global macro and relative value. Evanston Capital said the Outlook has taken on increased relevance as institutional investors and financial advisers look to diversify away from increasingly concentrated public equity markets.
Within long-short equity, the firm expects a shift in the drivers of alpha in 2026. While long exposure was the primary contributor to returns in 2025, Evanston Capital believes value-add will become more balanced between long and short positioning this year. Liquidity management and trading flexibility are expected to be critical, particularly in market conditions that may mask underlying liquidity risks.
In event driven strategies, the firm noted that corporate activity was disrupted last year by tariff-related uncertainty. However, it expects improving event momentum to carry into 2026, with conditions supportive of mergers, restructurings and other corporate actions, at least through the first half of the year.
For global macro managers, Evanston Capital highlighted opportunities stemming from ongoing de-globalisation trends, which are driving increasingly divergent economic outcomes across regions. The firm said this divergence should expand the opportunity set for macro managers able to deploy trades across directional, relative value and volatility strategies, although less stable correlations could introduce additional complexity.
In relative value, Evanston Capital sees the most compelling opportunities among specialist, capacity-constrained managers with modest asset bases and disciplined use of leverage, particularly in niches where inefficiencies persist.
“There is less competition today than in years past for differentiated, specialist managers who possess deep knowledge of their universe to add alpha,” said Kristen VanGelder, co-chief investment officer and lead author of the Outlook.
