Hedge Funds Return 7.46% in H1; Investors Plan Bigger Allocations

Hedge funds produced an average return of 7.46% in the first half of 2026, ahead of a 4.80% target for the period, and investors plan to increase allocations to several strategies, according to a BNP Paribas Capital Introduction allocator survey.

The survey covered 175 institutional allocators across 18 countries representing about $1.2 trillion in hedge fund assets. The BNP Paribas All Funds Aggregate Index recorded a 7.35% asset-weighted gain for H1, while the fund-weighted return was 6.02%.

Equity long-short was among the top performers, posting a 12.58% asset-weighted gain and a 9.15% fund-weighted return. Convertible trading and multi-strategy funds each returned 8.03% on an asset-weighted basis. Quant macro funds produced a 7.13% fund-weighted return. Credit strategies returned 3.03% on an asset-weighted basis, the weakest among the major groups.

Systematic strategies showed strong longer-term results. Commodity trading advisor (CTA) funds generated roughly 7% of alpha over the 12 months through June, and quant multi-strategy funds delivered about 7% alpha over both three- and five-year periods.

Net new capital into hedge funds accelerated in H1: allocators reported $26.8 billion of net inflows during the first half of 2026, more than double the $10.8 billion recorded in H1 2025. Allocators expect a further $24.9 billion of net inflows in the second half. Thirty-eight percent of respondents identified new capital as the main source of incoming flows.

On planned allocations, 35% of respondents intend to increase equity long-short positions in H2, 29% plan to add discretionary macro, 25% plan to boost equity market neutral and 24% plan to raise quant equity exposure. Regionally, 41% of allocators increased exposure to Asia-Pacific and 32% increased exposure to Europe in H1. For H2, 49% expect to raise allocations to Europe, 48% to Asia-Pacific and 42% to North America.

Interest in specific markets rose: 12% of allocators increased China allocations in H1, up from 6% in the same period a year earlier, and 28% plan to increase exposure to Japan in H2.

Alternative UCITS strategies returned an average 4.36% in H1 and attracted about $1.2 billion of net inflows. Respondents expect roughly $1 billion more of UCITS inflows in H2, with equity long/short the most requested format within the UCITS wrapper.

The findings reflect reported performance in the first half of 2026 and allocators’ stated plans for the remainder of the year, as captured in the BNP Paribas Capital Introduction survey.