Hedge funds attracted $116 billion in net inflows last year, the highest since 2007, pushing total assets under management above $5 trillion for the first time. Performance gains added another $527 billion, driven by an average return of 12.5%, the strongest in 16 years.

Investors flocked to hedge funds as flexible strategies thrived amid market uncertainty. Fund managers adapted quickly to changing conditions, drawing capital from those seeking alternatives to traditional markets. The trend marks a reversal from recent years of outflows or flat growth.

The momentum is expected to continue into 2026, with HFR predicting accelerated growth. As private market appetite cools, hedge funds are regaining favor for their liquidity and tactical edge. Institutional and high-net-worth investors are likely to increase allocations further.