New York, London, 23 April 2026 — Hedge fund performance turned negative in Q1 amid the sell-off in global markets sparked by conflict in the Middle East, but flows remained positive as investors continued to allocate to alternatives.
Across the $1.3trn of hedge fund assets administered by the Citco group of companies (Citco), gains achieved in the first two months of the year were wiped out by March’s downturn. Funds had a weighted average return of -1.4% in Q1, bringing a 13-quarter winning streak for hedge funds to a close.
Event Driven, Multi-Strategy and Equity-focused funds were all in the red for the quarter, with Event Driven funds seeing a weighted average return of -5%, Multi-Strategy at -3.9%, and Equities at -1.8%. However, several strategies were positive in Q1, with Global Macro funds the top performers with a weighted average return of 8.5%, building on Q4’s returns, while Commodities strategies came in at 7.1% against a backdrop of soaring commodity prices. Fixed Income Arbitrage funds were also in the green, at 0.1%. On an assets under administration basis, all categories also saw negative performance.
Whilst performance declined, hedge funds saw inflows in every month of the first quarter, recording one of the highest net inflows in a single quarter seen so far this decade. Funds had overall net inflows of $24.1bn in Q1, just ahead of the $23.5bn seen in Q3 of last year, as subscriptions of $69.8bn far outweighed redemptions of $45.7bn across the three-month period.
Mult-Strategy funds attracted the majority of inflows in Q1, with net inflows of $10.5bn, followed by Hybrid funds at $8.6bn and Fund of Funds at $4.9bn. Equity-focused strategies were also positive, at $1.6bn, while the remainder were broadly flat. The only exception was Global Macro strategies which saw net outflows of $1bn.
Meanwhile, trade volumes set another record. Hot on the heels of the previous all-time high in Q4 2025, monthly and quarterly client volumes both set new peaks in Q1, with January the stand-out month. Daily trade volumes soared to over 37 million trades on average in the opening month, buoyed by activity from high-frequency strategies.
The first quarter of 2026 also saw treasury volumes accelerate year-on-year, with a total of 187,591 payments administered, significantly higher than the corresponding quarter last year and just below Q4 2025’s record tally.
Declan Quilligan, Head of Hedge Fund Services, Citco Fund Services, said: “In the opening three-months of 2026, hedge funds had their first negative quarter since 2022, with many strategies impacted by swings in markets.
“However, in some areas – specifically Global Macro and Commodities – returns were positive as the conflict in the Middle East impacted sentiment towards various asset classes differently.
“There was also no let-up in investor demand for hedge funds. We saw the fifth consecutive quarter of net inflows into hedge funds as investors continued to see the benefits alternative investments offer to portfolios.”
About the Citco group of companies (Citco)
The Citco group of companies (Citco) is a network of independent companies worldwide. These companies are leading providers of asset-servicing solutions to the global alternative investment industry. With $3 trillion in assets under administration and operations spanning across 36 countries, Citco’s unique culture of innovation and client-driven solutions have provided Citco’s clients with a trusted partner for more than four decades. Having grown organically into one of the largest asset servicers in the industry, Citco’s Fund Services companies offer a full suite of middle office and back office services including treasury and loan handling, daily NAV calculations and investor services, corporate and legal services, regulatory and risk reporting as well as tax and financial reporting services. Investing heavily in innovation and technology whilst further developing its current suite of client-friendly solutions, Citco will continue into the future as a flagbearer for the asset-servicing industry.
