Allocations to rise as H1 hedge fund performance surpasses investor expectations, says BNP Paribas survey

Hedge fund investors are preparing for a stronger second half of 2026, driven by robust returns and increased allocation plans, according to BNP Paribas' latest allocator survey. The survey, which polled 175 investors from 18 countries holding about $1.2tn in hedge fund assets, revealed an average H1 2026 hedge fund portfolio return of 7.46%, significantly exceeding the 4.80% target, and projecting a full-year return potential of 9.60%.

The BNP Paribas All Funds Aggregate Index also outperformed with a 7.35% asset-weighted gain, compared to a 6.02% fund-weighted return.

Equity long-short strategies led the pack, delivering a 9.15% fund-weighted return and a 12.58% asset-weighted gain. Convertible trading and multi-strategy funds also performed well, with 8.03% and 8.03% asset-weighted returns, respectively. Quant macro funds returned 7.13% on an asset-weighted basis. Credit strategies lagged, generating only 3.03% on an asset-weighted basis.

Systematic strategies, including CTA funds and quant multi-strategy funds, continued to showcase impressive longer-term performance, delivering around 7% of alpha over 12 months and 7% over 3- and 5-year periods. This strong performance has prompted significant inflows, with hedge funds attracting $26.8bn of net new capital in H1 2026, more than double the $10.8bn seen in the same period of 2025.

Allocators forecast another $24.9bn in net inflows for the second half of the year, with 38% of respondents attributing inflows primarily to new capital.

Equity long-short strategies were the most sought-after for the second half, with 35% of investors planning to increase allocations. Discretionary macro followed at 29%, equity market neutral at 25%, and quant equity at 24%. Asia-Pacific and Europe showed the highest proportion of allocators increasing exposure during H1, at 41% and 32%, respectively.

Europe remains the leading region for planned allocation increases in H2, followed closely by Asia-Pacific, while 42% of respondents expect to boost their North American hedge fund exposure. The survey also noted a growing interest in China, with 12% of allocators increasing allocations during H1, up from 6% in the same period last year.

Japan is also garnering attention, with 28% of respondents planning to increase exposure in the second half. Additionally, demand for alternative UCITS products remains strong, with these strategies generating an average 4.36% return during H1, and investors expecting another $1bn in net inflows during H2.