NEW YORK — Hedge funds are pulling in more investor capital than managers had expected at the start of 2026, marking the first time in three years that fundraising has surpassed initial expectations, according to a Bank of America report reviewed by Reuters.
Strong investment performance during the first half of the year has helped revive investor demand. Bank of America expects hedge funds to remain one of the most popular asset classes through the rest of 2026, with investors continuing to favor large managers.
Equity-focused and multi-manager funds have attracted particular interest. Investors are also showing strong demand for strategies focused on technology, media and telecommunications, healthcare and energy.
Bank of America surveyed 321 asset allocators for its global markets capital strategy report. The respondents included investors overseeing substantial pools of institutional and private capital.
Pension funds, fund-of-funds managers and private banks said they plan to raise their allocations to hedge funds this year.
Vanessa Bogaardt, Bank of America’s global head of capital strategy group and consulting services for prime financing, said demand has been especially strong for managers pursuing global investment strategies.
The survey also found that investors are changing how they choose hedge-fund managers. About 60% of respondents said they favored allocating capital to newer managers over more established firms.
The increased fundraising comes after a strong period for the industry. Hedge funds returned 5.5% through July, according to the Bank of America survey, making the first half of 2026 the sector’s strongest performance period since 2010.
That performance came despite a significant setback for some funds in July, when a selloff in artificial-intelligence stocks weighed on managers with substantial exposure to the AI trade.
Investors overseeing roughly $1 trillion in hedge-fund assets who took part in the survey expect stock-picking strategies to remain particularly attractive through the remainder of 2026.
Demand has not been uniform across alternative investments, however. Interest in private credit funds has declined as investors have become more concerned about opaque valuations, redemption pressure at some non-traded funds and exposure to software companies facing disruption from artificial intelligence.
Major banks have continued to benefit from the activity. Their prime-brokerage businesses have collected substantial fees by providing lending and other services to large multi-strategy hedge funds.
The strong fundraising backdrop indicates that investors remain prepared to put money into active investment strategies even as markets contend with greater volatility, higher expectations for interest rates and uncertainty over the future of AI-related investments.
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