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With the release of the HFR Global Hedge Fund Industry Report for 2026Q3, join HFR President Ken Heinz Heinz as he explains which strategies led gains, how investor flows held up, and how interest rates, oil, the midterm elections, and IPO expectations could shape performance ahead.

Keywords

hedge funds, HFR Global Hedge Fund Industry Report, Q3 2026, macro strategies, relative value arbitrage, event-driven investing, equity hedge, investor flows, elections, IPO

Chapters

00:00 Ken Heinz Heinz on hedge fund performance in a volatile 2026
02:10 Oil, interest rates, and equity-market spillover
04:24 Sub-strategy results: CTAs and long-short technology
06:13 Rate-sensitive relative value and spread opportunities
07:10 IPO expectations and the event-driven outlook
08:36 How macro models may shift after the midterms

Resources

Get your copy of the HFR Global Hedge Fund Industry Report 2026 Q3  

LinkedIn – https://linkedin.com/in/kenheinz

Transcript

S. Aneeqa Aqeel (00:00)
Welcome back to HFR World. We’re excited to bring you an overview of the hedge fund industry from HFR’s Global Hedge Fund Industry Report for 2026 Q3, which has just come out. And with us today is president of HFR Ken Heinz. Welcome Ken.

Ken Heinz (00:19)
Thanks for having me on, Aneeqa

S. Aneeqa Aqeel (00:21)
So Ken, 2026 has been marked with record volatility. How well has the industry held up through Q3 across the main strategies?

Ken Heinz (00:34)
That’s a great question. It’s not only record volatility, but I think the volatility of volatility has also been a record. I can’t remember an environment where we’ve seen such polarizing intramonth, intraday changes shifting in risk-on and risk-off behavior driven by so many different variables.

At so many different times. And through that, so that’s the environment that we’re in now. The second and the third quarter were very different, very different entirely, almost polar opposites of either of each other. But through that, hedge funds gained, they’ve gained for the year, and they have navigated all this volatility very skillfully, and you can see here.

In terms of the most specific answer to your question, certainly it’s been a banner year for macro strategies. You can see here up 12.2%. And then when you look under that strategy, you see that trend following quantitative CTA strategies and commodity oriented strategies are the ones that are leading that. But at the same time, fundamental discretionary strategies have done well as well, too. But it’s not that they’re the only strategies that gain. You can see here Equity Hedge, even despite the tremendous amount of technology and AI volatility, you still have a gain of over 7% in the first three quarters of the year.
Event-driven. Certainly, this is hinging on the IPO environment, some of the private market valuations that are going on in the world. That also still posting a gain despite the third quarter volatility. And then lastly, relative value arbitrage, the most interest rate-sensitive area of the market, primarily fixed income-based strategies, arbitrage strategies, those have posted a gain about 3%. I think what’s really interesting about the performance environment we saw, particularly in the third quarter, is that we saw not only the correlation, but the overcorrelation between historic spike in interest rates as it relates to the lack of clarity on the Iran military conflict and the price impact of oil that that has had on the interest rate picture. And then the downstream effect on equity markets of higher oil prices and higher interest rates has been the operating environment that hedge funds have navigated for the past three months.

Now I would like to speak to the assets overall industry. While the second quarter showed amazingly strong growth in the hedge fund industry, you see a record, growth here. The third quarter was a more flattish environment, but it wasn’t flat from the sense that investors weren’t allocating new capital to hedge funds. In fact, they did continue to see strong inflows of capital into the hedge fund industry. However, because of the more mixed back and forth performance environment in the quarter, you actually had a very small performance-based outflow of capital offset by new investors’ inflows.

And I think what investors are looking at right now is they’re recognizing the value of hedge funds in their portfolio, and they’re looking to continue allocating to them and increasing allocations because of exactly the environment we’re seeing and the expectation we’re heading into the midterms. All of the things that have been sources of volatility continue to be drivers of volatility with no clear catalyst for those changing in the short term.

S. Aneeqa Aqeel (04:24)
So, can you speak to how performance in sub strategies might nuance this analysis?

Ken Heinz (04:31)
Yes, absolutely. So I commented briefly on the fact that the primary driver of the macro gains were substrategies which included trend following, quantitative CTA, commodity strategies, and even fundamental discretionary thematic thematic environment, more so because of the interest rate picture than because of the equity or the commodity picture. Those are some of the leading areas that we have seen. But even as you look across other strategies, particularly in the equity side, we’ve seen tremendous amount of volatility, but you’ve seen substrategies even with the big sell-off in technology to start the quarter, you still see long short technology being a leading area of performance within the equity hedge construct. And so it’s really those types of observations that are driving performance gains industry-wide and continuing to draw capital into the industry because of that.

S. Aneeqa Aqeel (05:41)
We’re heading into the midterm elections. There’s already a lot of uncertainty around the elections. Which strategies are best positioned to gain from the uncertainty now and its ultimate resolution next month?

Ken Heinz (05:57)
That’s a really great question. I can tell you a scenario for each of the four strategies and how the environment could evolve in a favorably or unfavorable way for that type of strategy.
But let me start with the strategy that I think a lot of investors are focusing on. Which is relative value arbitrage: it’s a very large area of capital and it’s the most interest rate sensitive. It’s the most credit sensitive, fixed income arbitrage, legs of trades, things like this. Even though it’s gained for the year, it’s the lowest performing of the four main strategies. In the last week and a half, we’ve seen.

Interest rates come down from that historic spike that they saw in the last month and really the last six weeks coming into the end of September. And I think you’ll see that reflected in performance of these strategies. I think as that interest rate spike occurred, you saw the spread widening. And I think that you’re going to see a lot of that contraction come back, and that’s going to drive strong performance in the relative value arbitrage strategies.

I think in the month of October and through the end of the year. So that’s an area that I really like. similarly, event-driven strategies again, this has kind of a mixture equity and credit and interest rate exposure all rolled into one. And I guess the the other driver of performance here is certainly IPOs and the expectation for the IPO market. That has gone from in June when there was optimism with regard to the IPO cycle to the middle of September, where a lot of that optimism had been priced out of the market. As of today, again, today we see the announcement about the Anthropic IPO proceeding. That may be an area where investors are coming back to because those private companies which are trading now actively in the private market are setting up for a continuation of that cycle, which started in January, maybe it was got a little disrupted in the third quarter. And then to begin the fourth quarter, it sounds like that IPO cycle is again picking up some steam. And that I think it will drive strong performance in the event-driven strategies. I think with the election behind us and getting a little bit into the latter part of the year, you’re going to continue to see strong performance there.
And then finally, last comment is macro. Macro has been the star performer through the third quarter volatility. Very impressive for macro strategies across all of the different substrategies, too. And as that is likely to change after the midterm election, some of those drivers are very likely to be disrupted by policy shifts and things like that. As you know, those strategies are highly liquid. Those models will turn over those exposures. And I I think that that over correlation that we’ve seen between oil and interest rates is likely to break down, and you’re going to see those models transition to new opportunities as we get into the fourth quarter.

S. Aneeqa Aqeel (09:22)
Excellent. Well, thank you so much for sharing your insight and giving us a brief glimpse into the Global Hedge Fund Industry Report, which you can obtain from HFR.com. Thank you for your time, Ken.

Ken Heinz (09:34)
Great, thank you.

 

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