Citco Q3 report sees hedge funds attract $36bn despite softer performance

Hedge funds attracted $36bn in net inflows during the third quarter of 2026 despite posting a negative weighted average return of 0.7%, according to Citco's latest Quarterly Hedge Fund Report. The quarterly decline followed a 12.3% gain in Q2, the strongest quarterly performance of the decade. Although the weighted average return was negative, 53% of funds administered by Citco delivered positive returns in Q3. Year-to-date weighted average returns stood at 10.5% through September, and year-to-date net inflows were well over $100bn.

Performance was led by commodities strategies, which gained 11.9% in the quarter, followed by global macro funds at 3.1%. Event driven strategies recorded the steepest losses at 3.8%, while multi-strategy funds declined 1.4%, fixed income arbitrage fell 1.1% and equity strategies lost 1%. On a year-to-date basis, global macro led at 26.4%, followed by commodities at 14.3% and equities at 12.2%. Multi-strategy funds gained 7.2%, while event driven was the only strategy in negative territory, down 1.7%.

Investor demand remained concentrated in diversified vehicles. Multi-strategy funds attracted the largest share of new capital at $15.4bn, followed by hybrid funds at $12.3bn and funds of funds at $5.7bn. Larger managers continued to dominate fundraising: funds with more than $10bn in assets under administration took in $24.9bn. By region, the Americas accounted for $20.8bn of allocations, Europe $13.8bn and Asia $1.4bn.

Performance also varied by fund size. Managers overseeing between $1bn and $3bn recorded the largest quarterly decline at 2.1%, while funds with more than $3bn in assets under administration fell 0.6%. The largest managers remained ahead for the year, with a weighted average return of 13.4%.

Declan Quilligan, Head of Hedge Fund Services at Citco Fund Services (Ireland), said continued demand for diversification was supporting inflows, particularly into multi-strategy funds, despite the moderation in returns following an exceptionally strong second quarter. On the operational side, Citco's Middle Office Solutions team processed a record 208,210 treasury payments in Q3, up from 193,433 in Q2, while trading volumes recovered in September after a summer slowdown. Straight-through processing averaged 97.6% during the quarter.