Hedge funds delivered their strongest quarterly performance of the decade so far in the second quarter of 2026, with equity, global macro and multi-strategy funds leading a broad-based rebound and investor inflows reaching a new high, according to Citco.
Funds administered by Citco recorded a weighted average return of 12.3% in Q2, up sharply from 8.3% in the previous quarterly high and following a weaker first quarter.
Equity funds led performance with a weighted average return of 15.7%, followed by global macro at 13.4% and multi-strategy funds at 10.5%. Event-driven strategies returned 7.5%, while fixed-income arbitrage funds gained 3.4%.
Commodities were the only strategy in negative territory, posting a weighted average loss of 1.8%.
The strongest performance came from the largest funds. Funds with more than $3bn in assets under administration generated a weighted average return of 14.7%, compared with a 1.7% loss in the previous quarter. Funds with between $1bn and $3bn returned 9.4%, while those in the $500m-$1bn category gained 7.8%.
The strong performance was accompanied by record investor demand.
Hedge funds attracted $39.2bn in net inflows during the quarter, up from $24.1bn in Q1 and the highest quarterly total of the decade so far. Gross subscriptions exceeded $90bn over the three-month period, marking the sixth consecutive quarter of net inflows.
Multi-strategy funds were the primary beneficiaries, attracting $28.4bn of net inflows, almost three times the $10.5bn recorded in Q1. Hybrid funds received $8.6bn, followed by fund of funds at $3.1bn and equity strategies at $1.3bn.
Global macro strategies, however, experienced $2.5bn of net outflows during the quarter.
The largest funds also dominated investor allocations. Funds with more than $10bn in assets received $26.7bn of net inflows, followed by funds in the $5bn-$10bn category with $6.8bn and those between $1bn and $5bn with $5bn.
Europe was the strongest region for inflows, attracting $18.2bn, narrowly ahead of the Americas at $17.8bn. Asia recorded $3.2bn of net inflows.
Trading activity moderated from the record levels seen in Q1 but remained above both the fourth quarter of 2025 and the corresponding period a year earlier.
April saw overall trading volumes fall 12.5% month-on-month, with the sharpest declines concentrated in rates and credit-linked products. Volumes then rose 4.8% in May before increasing again in June, when activity was concentrated in foreign exchange, cross-rate products, commodity futures and index futures.
Citco said its trading platform maintained high levels of straight-through processing throughout the quarter, with monthly rates ranging from 96.3% to 97.9%.
Treasury activity also reached a new high. Citco’s Middle Office Solutions team processed 193,433 payments during Q2, surpassing the previous quarterly total of 187,591 payments in Q1. June alone accounted for more than 72,000 payments.
The quarterly payment volume has nearly quadrupled since the start of the decade, according to Citco.
“Hedge funds are undoubtedly back with a bang, with performance accelerating and investors allocating more to the sector,” said Declan Quilligan, head of hedge fund services at Citco Fund Services.
