Hedge funds kicked off 2026 with momentum posting an average return of 0.9% in January, marking a run of 10 consecutive months of positive performance, according to the latest Monthly Hedge Fund report from global hedge fund administrator Citico.
Global macro strategies extended their run as the dominant strategy, a continuation of 2025’s performance. The strategy delivered a weighted return of 6.5% in January, outperforming commodities and fixed income arbitrage which returned 2.2% and 0.9%, respectively.
In terms of assets under administration (AUA), smaller funds – less than $200m AUA – saw the strongest return of 1.4%, while the largest funds – more than $3bn AUA, which dominated performance in 2025 – posted an average return of 0.7%.
At an individual fund level, the spread between worst and best performers reached 9.9%. This is a significant increase from 6.6% posted in December and demonstrates that despite global macro strategies remaining dominant, markets may be driven by more company-specific factors which creates greater dispersion.
The report further highlights net inflows of $6.9bn for the start of the year, with subscriptions of $16bn. The capital inflows corroborate findings from the Hedgeweek® AIMA Allocator Sentiment Report H1 2026, which outlined strong allocator confidence of 71% in their hedge fund portfolios – a notable rise from the 52% recorded in the previous six months. Allocators are also confident their portfolios will meet targets, yet deployment has become more measured with 59% keeping allocations unchanged.
The report also highlights that allocators are willing to pay higher fees for specific strategies, which makes sense given we are already seeing hedge fund performance divergence according to the latest Citico hedge fund findings.
Multi-strategy funds were the greatest recipient of capital inflow, receiving over $3.3bn, followed by equities at $2.4bn and fund of funds strategies at $1bn. Multi-strategy continues to attract flows because of its risk management appeal, where capital can be shifted dynamically depending on market conditions.
At the regional level, Europe has been the frontrunner attracting $4.6bn of January inflows, ahead of the Americas and Asia drawing $1.5bn and $0.8bn, respectively – a sign that European equities are still offering a discount compared to their US equivalents.
