Global hedge funds are heading toward another exceptional year, potentially topping their strong 2025 performance, as the artificial intelligence boom continues to lift returns across nearly every major investment strategy. That’s according to a Goldman Sachs client note reviewed by Reuters.
Through the first six months of this year, hedge funds posted an average return of 7% — significantly higher than the 10-year average of 4.1%, Goldman’s report found. The only times those returns were surpassed were during the COVID-era years of 2020 and 2021, when extreme market swings created unusual opportunities for fund managers. This marks the sixth straight six-month period in which hedge fund returns have beaten their long-term average.
Goldman described the broader investment environment in its report: “The first half of 2026 was notably strong for risk assets – an equity market rally helped to offset softer fixed income performance, propelling a 60/40 passive portfolio to a return of 5.7% – but in spite of this, hedge funds continued their run of outperformance.”
Investor appetite for hedge funds has also grown considerably this year, with capital flowing into the industry at a broadening pace. In a July survey of 341 hedge fund allocators — investors who channel money into hedge funds — overseeing more than $1.5 trillion in assets, Goldman found that nearly half planned to increase their hedge fund investments during the second half of 2026. Just 3% said they expected to pull back. Goldman noted that net demand for hedge funds hit a new record, outpacing other alternative investment categories.
Institutional investors surveyed by Goldman reported average hedge fund portfolio gains of 7.3% during the first half of the year. Private capital investors, which include family offices and private banks, reported even stronger returns of 8.8%.
For the first time in five years, every major hedge fund strategy attracted new investment dollars during the first half. Computer-driven, or quantitative, funds continued to draw strong interest, and multi-strategy funds saw their highest level of new money in five years.
The hedge fund industry as a whole also continued to beat the traditional “60/40” portfolio — a standard benchmark that puts 60% of assets into stocks and 40% into bonds. Goldman reported that hedge funds have outperformed that benchmark by roughly 250 basis points, or 2.5 percentage points per year, over the past five years. The bank attributed this to a more favorable environment for generating returns above market benchmarks.
Among individual strategies, equity long/short funds stood out with average gains of 17.7% in the first half — a standout performance driven by unusually wide gaps between individual stock performances, which Goldman said created strong stock-picking opportunities. Stock-trading hedge funds wrapped up June with double-digit returns for the year, helped by their ability to successfully maneuver through heavily traded positions.
