News Digest: Largest Hedge Funds Trail the Broader Industry in First Half of 2026
October 26, 2026
The world’s 100 largest hedge funds underperformed the wider industry in the first half of 2026, returning 6.0% against 7.0% for the broader sector, according to new research from a Bloomberg-owned data provider. Together, these managers account for roughly $3.2tn in institutional allocations, yet scale and risk management did not translate into an edge over smaller rivals.1
The gap emerged after a volatile March, when an energy shock tied to the Iran conflict caused a 3.2% maximum drawdown among the biggest funds. That was broadly in line with the 3.3% decline across the wider hedge fund index.
Results differed sharply by strategy. Among long/short equity managers, the largest funds returned 9.2% in the period, beating both the broader long/short equity index at 8.9% and a 60%-exposure S&P 500 benchmark at 6.2%. These larger managers also hold a longer-term lead, having returned 21.4% in 2025 versus 14.8% for smaller peers.
Multi-manager platforms proved resilient during the March turbulence. Their maximum drawdown of 1.25% was their largest in three years, but diversified exposures and dynamic capital allocation limited the damage, and most had recovered by April.
Relative value and arbitrage strategies told the opposite story. The largest funds returned 2.9% in the first half, compared with 5.4% for the broader strategy index. The research attributed the shortfall partly to smaller managers’ greater flexibility in executing trades, especially where speed and position sizing matter most.
The firm’s chief strategy officer said the results show why investors should evaluate hedge fund performance by strategy rather than size alone. He noted that the largest long/short equity funds have led smaller peers in every full year since 2023, while smaller relative value funds have kept their advantage.
Overall, the findings point to a clear divergence: larger managers retain the upper hand in long/short equity, while smaller funds do better in strategies that reward trading agility and fast execution.
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