Total global hedge fund industry capital pushed further above the historic USD5 trillion milestone, jumping for the 14th consecutive quarter in 1Q26 and extending to a new record USD5.22 trillion, as reported in the latest HFR Global Hedge Fund Industry Report.
The firm writes that hedge fund managers navigated an unprecedented surge in geopolitical risk and volatility in 1Q26, led by the surge in oil prices and uncertainty driven by escalation of the Iran military conflict. In addition to this, risk-off sentiment was also driven by weakness in large cap technology and software companies threatened by expanding AI capabilities, as well as weakness and illiquidity risks associated with private credit exposures.
“Against the powerful backdrop of risk and uncertainty driven by the Iran military conflict/shipping supply chain disruption, AI software industry disruption, private credit weakness and macroeconomic/geopolitical uncertainty stemming from the transition at the US Federal Reserve, US midterm elections, and the potential for shifting in military alliances, institutional investors continue allocating to hedge funds,” says Kenneth J. Heinz, President of HFR.
Industry capital grew by USD64.0 billion in 1Q, driven by estimated net asset inflows of USD44.5 billion, nearly matching the USD44.8 billion of inflows in 4Q25. The trailing two-quarter total of USD89.3 billion of net asset inflows is the highest two-quarter period since 2007 and follows the 2025 total of USD115.8 billion in net inflows, the strongest calendar year of investor inflows since 2007.
Hedge funds posted performance gains through the volatile 1Q26 led by the HFRI Macro (Total) Index, which surged +4.9 per cent for the quarter, despite declining -1.95 per cent in March. The fixed income-based HFRI Relative Value (Total) Index advanced +1.4 per cent for the quarter, while the HFRI Fund Weighted Composite Index added +1.05 per cent in 1Q as equities declined and oil surged over 40 per cent in March on the escalation of the Iran military conflict. HFRI sub-strategy performance was led by the HFRI EH: Energy/Basic Materials Index, which surged +8.4 per cent, and the HFRI Macro: Systematic Diversified Index, which jumped +7.0 per cent in 1Q26.
Macro strategy assets increased by an estimated USD34.5 billion in 1Q26, inclusive of net asset inflows of USD11.1 billion, bringing total Macro capital to USD821.0 billion. Macro sub-strategy asset gains were led by quantitative, trend following CTA strategies, which increased by USD17.75 billion, leading all sub-strategy asset gains.
Total assets in Relative Value Arbitrage (RVA) strategies increased by USD17.8 billion, rising to an estimated USD1.37 trillion inclusive of net asset inflows of USD5.5 billion. RVA sub-strategy asset increases were led by Multi-Strategy funds, which increased by USD10.4 billion and driving total sub-strategy capital to USD843.3 billion, the industry’s second largest sub-strategy, trailing on only EH: Fundamental Value.
Equity Hedge (EH) strategies grew by USD14.9 billion in 1Q26, as net asset inflows of USD16.2 billion outweighed the narrow performance-based losses to bring total EH capital to USD1.58 trillion. EH sub-strategy asset increases were led by Multi-Strategy funds, with these increasing by USD12.5 billion from the prior quarter.
Total capital in Event-Driven (ED) strategies declined narrowly in 1Q, as performance-based asset losses more than offset estimated net inflows of USD11.6 billion in 1Q26, bringing total ED capital to USD1.45 trillion. ED sub-strategy asset increases were led by Multi-Strategy funds, which grew by USD7.25 billion in the quarter.
Investor allocations were again concentrated in the industry’s largest firms in 1Q26, as firm managing over USD5 billion received an estimated USD39.0 billion of quarterly net inflows, while mid-sized firms (USD1-5 billion AUM) were allocated USD4.0 billion, and smaller firms (under USD1 billion AUM) added USD1.5 billion.
“The second half of the Jekyll-and-Hyde first quarter was dominated by dizzying, headline-driven dislocations and disruptions across energy, shipping, currency, interest rate, cryptocurrency, credit, AI and equity markets. Despite these challenges, hedge funds posted performance gains in the first quarter, while investors increased allocations to hedge funds not only in response to these volatile market micro-cycles, but as a mechanism to reduce overall portfolio volatility and to opportunistically position for the rapidly changing cycles. Expecting these risks to continue evolving throughout 2026, it is likely that the trend of increasing allocations to hedge funds not only continues but accelerates into mid-year,”, says Heinz.
