Global hedge fund assets edged up to a record $5.64tn in the third quarter, as investors kept allocating capital through a period of rising interest rates and volatility in technology stocks, according to new data from HFR.

Net inflows of $34.5bn more than offset performance-based losses of $27.4bn, extending the industry’s run of asset growth to 16 consecutive quarters. The modest gain contrasts sharply with the second quarter, when assets surged by a record $409.3bn. Total industry capital has risen by $480bn so far this year, including $124.1bn of net investor allocations.

Kenneth J. Heinz, president of HFR, said the quarter had been dominated by sharp interest rate increases and volatility in tech and AI stocks, while managers continued to navigate geopolitical uncertainty linked to the Iran conflict.

“Through this period, investors continued to allocate to strong performing funds which have effectively navigated the rapidly shifting geopolitical and financial environment,” Heinz said.

Large funds outperform

Performance diverged across the industry, with larger managers again outperforming smaller peers. The HFRI Asset Weighted Composite Index gained 1.2% in the quarter, while the HFRI Fund Weighted Composite Index fell 0.6%.

Macro strategies led returns, with the HFRI Macro (Total) Index rising 4.3%. Systematic trend-followers drove the gains: the HFRI Macro Systematic Diversified/CTA Index returned 5.7% in the quarter, taking its year-to-date gain to 15.7%.

Equity hedge funds bore the brunt of the tech sell-off. The HFRI Equity Hedge (Total) Index fell 2.1%, with fundamental growth and technology strategies down 4.3% and 3.3% respectively. Event-driven funds also lost ground, declining 1.9% as tech volatility dampened IPO expectations, while special situations strategies fell 4.4%.

Relative value strategies slipped 0.5% as rates rose, although asset-backed fixed income funds gained 0.8%.

Macro and multi-strategy lead asset growth

Macro assets rose by $40bn to $897.4bn, including $8.8bn of net inflows. Quantitative trend-following strategies accounted for $23.5bn of that increase.

Relative value assets grew by $19.2bn to $1.45tn on net inflows of $14.7bn. Multi-strategy funds led the increase, adding $19.8bn to reach a record $900bn.

Equity hedge and event-driven strategies both shrank despite attracting new money. Equity hedge assets fell by $31.6bn to $1.72tn, notwithstanding $6bn of inflows. Event-driven assets dropped by $20.5bn to $1.57tn, despite $4.9bn of new capital.

Capital concentrates at the top

Investor flows continued to favour the industry’s largest managers. Firms running more than $5bn took in $36.6bn of net inflows in the quarter. Mid-sized managers with $1bn to $5bn saw net outflows of $2.3bn, and firms below $1bn gathered just $190m.

The skew is starker over the year to date. Managers above $5bn have attracted $113.7bn of net inflows in the first nine months of 2026, compared with $8bn for mid-sized firms and $2.4bn for smaller managers.

Looking ahead, Heinz said hedge funds were positioned for a wide range of possible policy outcomes ahead of the US midterm elections, with significant implications for financial markets.