Hedge fund launches and liquidations both accelerated in the first quarter of 2026 as managers and investors responded to heightened market volatility driven by geopolitical tensions, artificial intelligence, cryptocurrencies and an uncertain macroeconomic backdrop, according to new data from HFR.
The latest HFR Market Microstructure Report estimates that 166 new hedge funds launched during the first three months of the year, up from 136 in the previous quarter and 121 in the first quarter of 2025. The increase follows a strong 2025, when 561 new funds were launched – the highest annual total since 2021.
Fund closures also rose sharply after remaining close to historic lows last year. HFR estimates that 129 hedge funds liquidated in the first quarter, up from 84 in the previous quarter and marking the highest quarterly liquidation total since the second quarter of 2024.
Despite the increase in closures, annual liquidations remained subdued in 2025, with an estimated 287 funds shutting down compared with 406 in 2024, which HFR said was the lowest annual total since 2004.
The report follows HFR’s earlier finding that global hedge fund assets reached a record estimated $5.22 trillion by the end of the first quarter of 2026.
Kenneth J Heinz, president of HFR, said the continued rise in new fund launches reflected sustained institutional and retail investor demand despite increasing geopolitical uncertainty.
He added that while equity markets continued to advance in early 2026, returns remained heavily concentrated in AI and technology-related sectors, creating both risks and opportunities for hedge fund managers during the second half of the year. Heinz also highlighted ongoing uncertainty surrounding the Iran conflict, the IPO market and AI-driven disruption as key themes likely to shape investment opportunities.
Equity Hedge strategies remained the most popular area for new launches, accounting for an estimated 80 new funds during the quarter, following 227 launches across 2025. Macro strategies ranked second with 52 new funds launched.
The same two strategy groups also recorded the highest number of closures, with an estimated 64 Equity Hedge funds and 25 Macro funds liquidating during the quarter.
Alongside the report, HFR announced the launch of its Tender Offer Funds Indices, designed to track the performance of tender offer-focused hedge funds. According to HFR, the asset-weighted version of the index gained 3.4% year-to-date through 10 July 2026.
Performance dispersion across hedge funds also widened during the second quarter. HFR said the top decile of managers in its HFRI Fund Weighted Composite Index returned an average of 36.4%, while the bottom decile lost an average of 8.2%, producing a 44.6 percentage point spread compared with 30.1 percentage points in the previous quarter.
Fee pressure continued across the industry. Average management fees edged down by one basis point during the first quarter to 1.32%, while average incentive fees slipped five basis points to 15.78%. Newly launched funds charged lower average management fees of 1.22% but higher average performance fees of 17.4%.
HFR also said Goldman Sachs, UBS, JPMorgan and Morgan Stanley remained the leading prime brokers serving hedge funds at the start of 2026, while SS&C GlobeOp, Citco Fund Services and IFS State Street continued to dominate the fund administration market.
