Allocators favor stock-pickers, multi-manager hedge funds in 2026

Bank of America surveyed 321 asset allocators responsible for about $1 trillion of hedge fund capital and found many plan to increase allocations to hedge funds in 2026. Equity-focused stock-picking strategies and multi-manager platforms drew the most interest.

The bank’s report says hedge fund managers have raised more capital than they initially targeted this year, the first time fundraising has exceeded targets in three years. Respondents included pension funds, private banks and diversified hedge fund investment vehicles that reported plans to lift allocations next year.

Allocators named technology, media and telecommunications, healthcare and energy among the sectors they favor. About 60% of those surveyed said they intend to allocate to new hedge fund managers rather than established names, a level not commonly seen in prior years. The survey shows stock-picking strategies are expected to remain the most popular area of hedge fund investment through the remainder of 2026.

Hedge funds gained 5.5% through July, putting the industry on course for its strongest first-half performance since 2010. A July sell-off in artificial intelligence-related stocks hit some managers with heavy technology exposure, illustrating the risks of concentrated positions even as the broader sector posted gains.

Multi-manager firms benefited from the market environment by allocating capital across multiple strategies and markets, providing investors with diversified sources of return. The increase in allocations supported prime brokerage businesses at major banks, which reported stronger revenue from financing, custody and other services for large multi-strategy funds.

The survey results cover investors responsible for about $1 trillion of hedge fund capital and show increased demand for both manager-level diversification and single-manager equity strategies in 2026.