Top 100 hedge funds trail wider industry in first half

The world's 100 largest hedge funds returned 6.0% in the first half of 2026, a point behind the 7.0% recorded across the wider hedge fund industry, according to Canoe Intelligence research reported by Hedgeweek on Oct. 21.

Canoe, a Bloomberg company, published the figures in its Hedge Fund VIP Performance Report for the second quarter, which puts the top-100 cohort at roughly $3.2 trillion in institutional allocations. The report found the largest managers struggled to beat smaller peers despite their scale and risk-management capabilities.

For a selector building a hedge fund sleeve, the report's split means a size screen and a strategy view point in opposite directions. The largest managers were ahead in long/short equity and behind in relative value and arbitrage, so a shortlist drawn on assets alone ranks the same firms differently depending on which strategy bucket a client is filling. The diligence question that follows is whether the trading flexibility Canoe credits at smaller relative-value shops survives growth in assets.

Long/short equity was the exception. The top 100 long/short managers returned 9.2% in the first half, against 8.9% for the broader long/short equity index and 6.2% for a 60%-exposure S&P 500 benchmark, the report said. The largest long/short funds also returned 21.4% in 2025 compared with 14.8% for smaller peers. Mike Muniz, chief strategy officer at Canoe Intelligence, said the largest long/short equity funds "have led their smaller peers in every full year since 2023, while smaller relative value funds have kept the edge."

Relative value and arbitrage ran the other way: 2.9% for the largest funds against 5.4% for the broader strategy index. Canoe attributed part of that gap to smaller managers' greater flexibility in executing trades, particularly where speed and position sizing are critical.

March supplied the stress test. An energy shock linked to the Iran conflict produced a 3.2% maximum drawdown among the largest funds, close to the 3.3% decline recorded across the wider hedge fund index. Multi-manager platforms contained it better, recording a 1.25% maximum drawdown — their largest in three years, according to the report — with most recovered by April. Canoe credited diversified exposures and dynamic capital allocation.

Canoe's reading is that strategy, not size alone, is the screen that matters. What the figures leave open is whether the relative-value gap reflects a durable advantage for smaller shops or the mechanics of trading at size, a distinction that decides whether capacity is the term an allocator needs to negotiate.