Hedge Funds Look Poised to Tap into the Paradox Across the Investment Landscape: Interview With Evanston Capital

The multi-manager firm Evanston Capital believes the investment environment today looks like a paradox. According to the firm, the markets may look “orderly on the surface,” but the underlying dynamics are growing more and more “complex and fragmented,” with innovation, deglobalization and uncertainty in policy causing sudden changes.

Active managers may outperform in 2026

As a result, there’s the potential to widen the gap between the haves and have-nots. Additionally, stock prices are fairly high while the benchmark indexes are growing more and more concentrated while credit spreads approach their lowest levels in history.

Evanston sees strong potential for active management over passive in the current environment, as active managers tend to be better at pulling out value from dispersion and spotting dislocation pockets where they can gather alpha instead of simply riding astride the beta of the broader market. The opportunities highlighted by Evanston for 2026 cover all major hedge fund strategies.

In an interview with Hedge Fund Alpha, Kristen VanGelder of Evanston Capital took a deep dive into the report, sharing some extra details.

What Evanston Capital looks for in managers

Evanston Capital prefers more specialized managers that focus on a particular niche or individual strategy rather than multi-strategy or multiple-manager funds. For example, within long/ short equity, the firm targets managers that don’t just specialize in that strategy but that also focus on a specific sector or region. Evanston looks for something that narrows the manager’s universe, allowing them to become a true expert and repeatedly mine that small universe for alpha opportunities on both the long and short side.

The firm seeks specialists that know what makes them uniquely talented and can focus on that. VanGelder said they also seek to invest in talent early, when their fund is smaller and really aligned around performance. Thus, Evanston tends to focus more heavily on early-stage investing.

Benefits in liquidity and trading flexibility

In their report, the Evanston team said they expect liquidity and trading flexibility to be important advantages, noting stressed markets and policy uncertainty can cause liquidity to decline steeply. They also reported that multi-manager platforms and quantitative funds now make up 85% of the average daily trading volume linked to hedge funds in stocks. The Evanston team believes this could create an “illusion of liquidity” that otherwise might not be in place if those market participants were to change their trading activities.

Also see: Taking A Deep Dive Into BlackRock’s Recommendation To Boost Hedge Fund Allocations

VanGelder told Hedge Fund Alpha that the growth in the amount of capital in multi-manager platforms and other short-term trading strategies has created far less competition for fundamentally oriented managers that can invest with a multi-quarter or multi-year horizon.

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