Hedge funds post best first half in years on AI boom

Global hedge funds delivered an average return of 7% in the first half of 2026, their strongest opening-half performance since 2021 and well above the 10-year average of 4.1%, according to a Goldman Sachs ↘ 4.68% note published Monday. The gains mark the sixth consecutive half-year period of outperformance against long-term averages, driven largely by stock-picking opportunities created by the artificial intelligence investment wave.

Equity Strategies Lead the Pack

Fundamental equity long/short funds were the top-performing strategy, returning approximately 17.4% year-to-date through June, according to Reuters. These funds benefited from wide divergences in individual stock performance, particularly in the technology and media sectors, where AI-exposed companies have seen outsized gains relative to laggards.reuters

Goldman Sachs's prime brokerage data showed that hedge funds returned 4% in June alone, capping a strong second quarter that erased losses sustained during the market turbulence of March. Short positions in sectors disrupted by AI contributed meaningfully to returns alongside long bets on technology winners.disruptionbanking+1

Investors Pile Back In

The strong performance is drawing fresh capital. Nearly half of hedge fund allocators surveyed by Goldman Sachs plan to increase their exposure in the second half of 2026, with demand concentrated in North America-focused strategies. The industry attracted net new capital for the first time in five years, reversing a prolonged period of outflows.devdiscourse

Private capital-focused hedge funds posted the highest returns among broad categories at 8.8%, while discretionary macro funds lagged due to difficulties navigating interest rate volatility.devdiscourse

A Sustained Run

The results extend a period of sustained outperformance that has helped rehabilitate the hedge fund industry's reputation after years of underwhelming returns. Goldman Sachs noted that hedge funds have outperformed a traditional 60/40 portfolio by roughly 250 basis points annually over the past five years.srnnews+1

Despite heavy selling of technology stocks during parts of the year, Goldman's research indicated that hedge funds remain "fundamentally bullish on AI," continuing to add positions in companies exposed to artificial intelligence infrastructure and applications.goldmansachs+1