Hedge Funds Gain 1.6% in May on AI Tech Rally

Hedge funds posted a 1.6% gain in May, with the HFRI Fund Weighted Composite Index up 1.6% for the month. Equity hedge and event-driven strategies were the main contributors, and the result extended gains recorded earlier in 2026, according to HFR data.

Kenneth J. Heinz, president of HFR, described 2026 as “the extreme opposite of a passive beta equity index exposure market cycle” and noted that hedge funds have handled a string of intense market dislocations and reversals in equities and commodities, including in technology.

Equity hedge managers led performance. The HFRI Equity Hedge (Total) Index rose 2.7% in May. Technology-focused equity hedge strategies were the strongest subgroup: the HFRI EH: Technology Index jumped 10.6% in May after a 10.5% gain in April, producing a two-month return of 22.3%—the highest since the index began in January 2008. The HFRI EH: Quantitative Directional Index advanced 4.0% and the HFRI EH: Fundamental Growth Index gained 3.75%. The HFRI EH: Healthcare Index declined 2.0%.

Event-driven funds also gained. The HFRI Event-Driven (Total) Index rose 2.1% in May. Activist strategies led that group with a 4.8% increase, special situations returned 2.6% and distressed and restructuring funds gained 2.0%. Financing conditions have steadied and equity prices have recovered, and investors increased positioning for potential merger activity and a heavier IPO calendar later in the year.

Relative value strategies produced modest positive returns. The HFRI Relative Value (Total) Index rose 0.6% in May. Corporate fixed income and multi-strategy relative value funds each added 0.9%, while asset-backed and convertible arbitrage strategies each returned 0.8%. Macro managers posted smaller gains: the HFRI Macro (Total) Index increased 0.2%, led by active trading strategies (+1.7%) and discretionary thematic managers (+1.2%).

Commodity-focused funds and trend-following CTAs lagged. Commodity funds fell 1.1%, driven by declines in oil and energy prices, and systematic diversified CTAs dropped 0.5%. Cryptocurrency-focused strategies slipped 0.3%. The HFRI Multi-Manager/Pod Shop Index rose 1.5%.

HFR introduced a suite of Tender Offer Fund Indices in May. The HFR Tender Offer Funds Asset Weighted Index advanced 1.0% in the month and stood 2.9% year to date. Liquid alternative UCITS vehicles also reported positive results.

Within the HFRX universe, the HFRX Market Directional Index climbed 5.0% and the HFRX Global Index rose 1.7%. The HFRX Equity Hedge Index gained 2.9%, led by the HFRX EH: Fundamental Growth Index, which jumped 5.4%.

Performance dispersion remained wide. The top decile of HFRI Fund Weighted Composite constituents posted an average return of 13.2% in May, while the bottom decile lost 5.8%, producing a 19 percentage-point spread compared with a 22.2-point spread in April. Over the 12 months through May 2026, the top decile returned 92.4% and the bottom decile fell 9.0%, a dispersion exceeding 100 percentage points. HFR’s preliminary estimates show roughly 70% of hedge funds delivered positive returns in May.