Hedge funds post first monthly loss in three months as July inflows reach $12bn

Hedge funds recorded their first monthly loss in three months in July 2026, with the industry's weighted average return falling 0.8%, according to Citco's latest monthly hedge fund update. The decline followed three consecutive months of gains through the end of June. Even so, more than half of funds generated positive returns during the month, and the industry's year-to-date return remained close to double digits at 9.7%.

Weakness was concentrated in equity and fixed-income arbitrage strategies. Equity strategies were the worst performers, falling 2.7% on a weighted average basis, while fixed-income arbitrage declined 1.2%. Most other strategies finished July in positive territory. Commodities were the strongest performers at 5%, followed by global macro at 1%, multi-strategy at 0.5% and event driven at 0.4%. Performance also weakened across fund sizes. Funds with less than $200m in assets under administration fell 1.6%, funds with $1bn to $3bn declined 1.2%, funds with $200m to $500m fell 0.9%, and funds above $3bn lost 0.7%. The $500m to $1bn segment was the only size category to post a gain, rising 0.2%. Performance dispersion narrowed, with the gap between the best- and worst-performing funds falling to 9.9% from 10.9% in June.

Investor demand held up despite the setback. Hedge funds attracted $12bn of net inflows in July, extending their run of monthly net inflows to seven consecutive months. Subscriptions of $20bn exceeded $8bn of redemptions, bringing cumulative 2026 net inflows to $86.9bn. Multi-strategy funds remained the dominant destination for capital, drawing $5.3bn in July and $49.2bn year to date.

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