Global hedge funds are on track to deliver another year of strong performance after the AI investment boom helped lift returns well above historical averages during the first half of 2026, according to a report by Bloomberg citing new research from Goldman Sachs.
The bank estimates that hedge funds generated average returns of 7% during the first six months of the year, comfortably ahead of the long-term first-half average of 4.1%. The performance has been surpassed only during the exceptionally volatile markets of 2020 and 2021 and marks the sixth consecutive half-year in which returns have exceeded the 10-year average.
Goldman attributed much of the industry’s success to managers’ ability to reposition portfolios as the AI investment theme has evolved. Rather than remaining concentrated in one segment of the market, hedge funds have shifted exposure over recent years from semiconductor manufacturers to power infrastructure and data centres before increasingly allocating capital to memory chip companies over the past 12 months.
The strong performance has also been accompanied by robust investor demand. In a July survey of 341 hedge fund allocators overseeing more than $1.5 trillion invested in the sector, Goldman found that almost half intend to increase their hedge fund allocations during the second half of 2026, while only 3% expect to reduce exposure.
The bank said net demand for hedge funds has reached a record high, with investor appetite exceeding that seen across other alternative asset classes.
Goldman also noted that investor preferences are shifting geographically. Following a move towards non-US strategies after President Donald Trump’s “Liberation Day” tariff announcements in April 2025, allocators have gradually begun rotating back towards North America-focused hedge funds, although international strategies still account for the largest share of planned allocation reductions.
Institutional investors surveyed by Goldman reported average hedge fund portfolio returns of 7.3% during the first half of the year, while private wealth investors, including family offices and private banks, achieved average gains of 8.8%.
For the first time in five years, every major hedge fund strategy attracted positive net inflows during the first six months of the year. Quantitative strategies continued to receive strong investor support, while multi-strategy funds recorded their largest inflows in five years.
By contrast, sentiment towards private credit continued to weaken. Goldman found that around 22% of hedge fund investors intend to reduce exposure to the asset class, while almost 40% of private banks surveyed expect to cut allocations amid growing concerns over recent losses within parts of the private lending market.
Goldman also highlighted the industry’s continued ability to outperform traditional balanced portfolios. Over the past five years, hedge funds have exceeded the returns of a conventional 60/40 equity and bond portfolio by around 250 basis points annually, reflecting what the bank described as a favourable environment for generating alpha.
Among individual strategies, equity long-short managers produced some of the strongest returns, delivering average gains of 12.9% during the first half of 2026.
Goldman said these funds benefited from an environment characterised by elevated single-stock volatility and relatively low correlation between individual equities, creating favourable conditions for stock selection. According to the bank, equity long/short managers have already exceeded the record levels of alpha generated during 2025.
Technology, media and telecommunications specialists, along with consumer-focused funds, were among the biggest beneficiaries of the AI investment theme, with returns almost doubling compared with the same period a year earlier.
Not every strategy has enjoyed the same success. Discretionary macro managers have struggled amid heightened interest rate volatility linked to the conflict involving Iran, with many funds yet to recover earlier losses. Quantitative macro strategies have also faced a more difficult backdrop as rapidly changing economic conditions reduced the effectiveness of some systematic models.
Despite those challenges, Goldman believes the combination of strong performance, continued allocator demand and favourable market conditions leaves the hedge fund industry well positioned to extend its run of outperformance through the remainder of 2026.
