US Midterms Live: Hedge funds post best midterm-year start since 2006
Historically, the second year of a presidential term has been the weakest for hedge funds, with the HFRI Fund Weighted Composite averaging 3.46%, against more than 13% in both the first and third years. Today, Americans across the country will head to the polls to cast their votes in the 2026 midterm elections. The buildup to such an important political event brings uncertainty on many different…
The 2026 midterm elections are taking place today in the United States, and despite the political uncertainty surrounding the event, hedge funds have been able to achieve their best start to a midterm year since 2006. This year, the composite HFRI Fund Weighted Index returned 6.88% from January to September 2026, outperforming the normalised annual returns of 3% during the second year of a presidential term.
In the past, hedge funds have averaged 3.46% in the second year of a presidential term, compared to 13% in the first and third years. Factors such as inflation concerns and political dynamics, including the potential for a "blue wave" in Congress, are influencing fund management strategies. Hedge funds are seeking opportunities across various asset classes, with equity hedge, event-driven, and relative value strategies favoring a Democratic president, while macro strategies perform better under a Republican administration.
Despite the political environment, the hedge fund industry has continued to experience growth, with capital increasing by 14% from 1990 to 2025, regardless of the party in power.
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