Hedge Funds Post 7% H1 Gain as AI Boom Fuels Investor Demand, Goldman Sachs Says

Hedge funds generated an average return of 7% in the first half of 2026, fueled by the ongoing artificial intelligence boom, placing the industry on course for another year of stellar performance, according to a client note from Goldman Sachs.

Strong First-Half Performance

The 7% average return for the first six months of the year significantly outpaced the 10-year average of 4.1%, as reported by Goldman Sachs. The bank noted that this marks the sixth consecutive half-year period where returns have exceeded the long-term average, with the current performance only surpassed during the volatile market conditions of 2020 and 2021.

Goldman attributed the success to managers adeptly navigating the "AI complex." The note explained that funds have "deftly shifted exposures through the 'picks and shovels' of the AI boom, moving from semis, to power & data centers, and in the last 12 months decisively towards memory stocks."

Investor Demand Hits Record High

Investor appetite for hedge funds has surged, with net demand reaching a new record, according to a separate Goldman Sachs survey. The July survey, which included 341 allocators overseeing more than $1.5 trillion in hedge fund assets, found key trends:

• Nearly half of the investors plan to increase their hedge fund allocations in the second half of 2026.
• Only 3% of respondents expect to reduce their exposure.

Ad

For the first time in five years, every major hedge fund strategy attracted fresh capital in the first half. Multi-strategy funds recorded their strongest inflows in five years, while quantitative funds also continued to draw significant new money. In contrast, investor sentiment toward private credit has cooled, with 22% of surveyed investors planning to decrease their exposure to the asset class.

Stock-Pickers Lead the Pack

Equity long/short funds were standout performers, delivering average gains of 12.9% in the first half. Goldman Sachs said these managers capitalized on an "incredibly supportive" environment characterized by high single-stock volatility and low correlation, creating prime opportunities for stock-picking.

Technology, media, and telecom (TMT) focused funds were also major beneficiaries of the AI trade. However, not all strategies thrived. Discretionary macro funds have reportedly been hampered by interest rate volatility, while some quantitative strategies have also faced a challenging macroeconomic environment, according to the report.

Overall, the industry has continued to outperform traditional investment benchmarks. Over the past five years, hedge funds have beaten a standard "60/40" stock and bond portfolio by approximately 250 basis points annually, reflecting a favorable environment for generating alpha, or returns above the market benchmark, Goldman concluded.