Investors are increasing their allocations to hedge funds in 2026, with stock-picking and multi-manager strategies emerging as the biggest beneficiaries of renewed appetite for the asset class, according to a report by Reuters citing data from Bank of America.
The report cites a a Bank of America report seen by Reuters as showing that hedge fund managers have raised more capital than they initially targeted for the year, marking the first time in three years that fundraising has exceeded expectations.
The bank’s survey of 321 asset allocators found that equity-focused and multi-manager hedge fund platforms are attracting the strongest demand. Technology, media and telecommunications, healthcare and energy are also among the sectors most favoured by allocators.
Pension funds, private banks and diversified hedge fund investment vehicles are all planning to increase their allocations, suggesting that institutional and wealth-management investors are becoming more constructive on the asset class following strong returns during the first half of the year.
The survey also points to a shift in how investors are selecting managers. Around 60% of respondents said they intend to allocate to new hedge fund managers rather than established names, a trend that has not typically been seen at this level in previous years.
Stock-picking strategies are expected to remain the most popular area of hedge fund investment through the remainder of 2026, with the survey representing investors responsible for approximately $1tn of hedge fund capital.
The increased appetite follows a strong period for hedge fund performance. Funds were up 5.5% through July, according to the Bank of America research, putting the industry on course for its strongest first-half performance since 2010.
The gains have come despite volatility surrounding the artificial intelligence trade. A sell-off in AI-related stocks in July hit some managers with significant technology exposure, highlighting the risks associated with concentrated positioning even as the broader hedge fund industry continued to perform strongly.
Multi-manager firms have been among the major beneficiaries of the environment, with their ability to allocate capital across multiple strategies and markets proving attractive to investors seeking diversified sources of returns.
The increased allocations are also feeding through to Wall Street’s prime brokerage businesses. Major banks have reported strong gains from prime services as they provide financing and other services to large multi-strategy hedge funds, which have generated significant returns from market volatility.
