What are the forces reshaping hedge funds right now?

The hedge fund industry will continue 2026 in a position of strength, supported by two powerful forces: strong recent performance and a return of market volatility. Geopolitical tensions, shifting interest rates and the impact of AI are creating frequent dislocations in markets. That environment plays directly to hedge funds’ strengths.

• Uncertainty: Hedge funds are increasingly seen as a response to uncertainty, with investors focusing on strategies that can adapt quickly to market unease rather than rely on stable market direction.

• Sentiment: Investor sentiment remains broadly positive, with 69% of respondents to our survey reporting performance in line with or above expectations, despite rising concerns around risk.

• Behaviour: Investor behaviour is changing. 33% plan to switch managers and a clear preference is emerging for larger, more established hedge funds over smaller competitors.

• Strategy: Strategy decisions are becoming more defensive and flexible. Whilst still high at 59%, investor desire for equities is down from 71% last year. Interest is rising for emerging markets, volatility trading and commodity approaches.

• Fees: Fee pressure is intensifying, with 47% of clients dissatisfied, creating growing tension between strong industry profitability and increasing demands for better value and alignment.

• Consolidation: The industry is consolidating rapidly, as capital flows disproportionately into the largest managers, while AI, digital assets and fee pressure begin to adjust how hedge funds operate and compete.

Access the data behind the industry’s next moves

The hedge fund landscape is moving fast. IG Prime’s State of the Hedge Fund Industry report gives you a deeper, data-backed view of what’s driving performance, where capital is flowing and how strategies are evolving this year.

Whether you’re allocating capital, advising clients or tracking market trends, it will help you make clearer, more confident decisions in a far less predictable environment.