After years of weak returns, closures, and investor outflows, the hedge fund industry has posted two consecutive years of double-digit gains, averaging roughly 11-12% in 2025.

If you ask Barclays, this performance has awakened the industry from a decade-long hangover. The 2010s have seen low volatility, high stock correlations, and near-zero interest rates. That environment favored passive investing and squeezed active managers. Yet the 2020s, by contrast, have seen higher rates, dispersion, and more volatility across assets.

"The 2020s have seen these same forces turn supportive again, much like in the 2000s," Barclays analysts wrote in the new 2026 hedge fund outlook.

Favorable Market Conditions

According to the data, Discretionary Equity stood out in last year's performance, delivering about 17% returns and 5.7% alpha. Market-neutral and low-beta managers did even better, producing more than 8.5% alpha, while quant equity strategies added roughly 5.8%.

Barclays also pushes back on the idea that hedge funds are too crowded to generate excess returns. Since 2015, industry assets have grown by around 70%, while global equities and bonds have expanded by roughly 150% and private markets by closer to 250%.

"Industry growth has not outstripped the breadth, depth, and scale of the investable universe," the bank noted.

Their conclusion is direct. Macro and market ...