Investor Demand Trends for Alternative Investment Strategies in 2026

The hedge fund industry consists of a wide variety of strategies that attract varying levels of investor interest over time. Factors such as capital market valuations, economic growth expectations, inflation rates, market liquidity, and risk tolerance significantly influence the demand for each strategy. Industry professionals spend a great deal of time analyzing these variables in order to identify which strategies are expected to offer the best opportunities for out-performance. One way to measure this is to survey investors regarding their current interests.

In this paper, we compare and analyze data submitted by investors from our June 2025 cap intro event with data recently compiled from the first 300 investors registered to attend our upcoming Gaining the Edge Global Virtual Cap Intro event taking place from June 15th to 26th. During registration, investors complete a detailed survey outlining their preferences regarding strategy types and managers that are of current interest. This provides broad insights into both overall demand for each strategy as well as trends in demand between years. Presented below is a comparative analysis of our survey findings, accompanied by commentary derived from feedback received from thousands of investors globally.

Strategies with Strong and Increasing Demand

Long/Short Equity captured the interest of 68% of 2026 respondents, which is the largest share among all strategies. This uptick from last year (63%) indicates the continued positive investor sentiment regarding fund managers’ abilities to generate alpha via stock selection. It may also be attributed to strong equity performance propelled largely by a small number of mega cap growth stocks. This rally has created wide valuation disparities between growth and value stocks along with large and small/mid-cap stocks. Many investors believe both are great environments for active managers. We expect increased demand for funds focused on value or small/mid-cap companies.

Low Net and Market Neutral Equity also benefitted from this positive sentiment relative to fund managers’ ability to generate alpha via stock selection as well as higher short term interest rates. This is particularly true among investors that are worried about global equity valuations and geopolitical risks around the world.

Global Macro has broad demand from over 60% of respondents this year, which is driven by increased volatility in the global markets and low correlation to other alternative investment strategies. Ongoing geopolitical conflicts and divergence in central bank policies have created more opportunities for alpha generation from skilled managers.

Long/Short Credit interest has increased from 31% to 40% of respondents. As credit spreads are relatively narrow and the path of interest rates becomes more uncertain, traditional long only fixed income strategies may face greater volatility. As a result, we’re seeing a shift away from long only fixed income, and allocators are looking to hedge their fixed incomes exposure by rotating towards long/short credit. These strategies are particularly attractive in environments characterized by volatility in credit spreads and rates, where manager skill in security selection has an increased opportunity to generate alpha. Sustained macro uncertainty and potential credit market dislocations will likely support allocator demand for long/short credit strategies, though manager selection remains critical.

Digital Assets have seen a growth of acceptance over the years, although allocators have diverging views on the value of the space. Respondents have confirmed this confluence as the category has increased year-over-year (25% vs 34%) while still only capturing a minority interest of the industry. Positively, this growing acceptance has been aided by regulatory tailwinds in the United States, which have sought to provide clarity and support for the asset class. However, the recent sell off in major cryptocurrency tokens could create hesitancy from investors.

Other Diversifying Strategies saw an increase from 29% of respondents in 2025 to 34% in 2026. Rather than signaling a shift in asset class preference, this trend reflects a broader theme within the alternative investment community: allocators are increasingly seeking niche or non-traditional strategies to enhance portfolio diversification and reduce reliance on broader capital markets.

Strategies Experiencing Declining Demand

The top four strategies with the largest declines in demand were all fixed income related: private credit, convertible arbitrage, structured credit, and distressed debt.

Private Credit has recently garnered media attention due to prominent managers gating their funds due to large redemption requests. Additionally, investors increasingly believe that the largest private credit managers are seeing a reduction in spreads on new loans as deal competition increases. Simultaneously, some managers may see a reduction in the credit quality and terms of their deals as they are forced to allocate more capital into the marketplace. With that said, idiosyncratic risks, management expertise, deal flow and work out ability, among other criteria, vary greatly from one fund to another. Many firms still have high quality portfolios and those with a differentiated approach will continue to generate strong alpha. There are major differences in risks being taken across firms and investors should be much more focused on how well the portfolio will hold up if we do enter a recession. In addition, we are also seeing small/mid-size private credit managers–those focused on smaller deals–are able to generate higher yields.

Distressed Debt’s decline in interest may largely be due to concern about tight credit spreads and the resilience of the global economy. However, there are still a number of investors that like the space due to pricing inefficiencies and the potential for skilled managers to generate strong alpha.

Structured Credit demand has decreased, in part due to over-allocation by investors following significant inflows over the past decade. Combined with interest rate movements and spread tightening, this has led to capital outflows. However, with less assets in the space, there will be an increased opportunity for alpha generation by top managers.

Evolving Allocator Preferences

In addition, we surveyed allocators on the minimum size of managers they would consider, and more than 63% indicated that they would consider a manager with less than $100 million in assets. This suggests that allocators believe smaller managers may have an edge in generating strong returns due to the nimbleness of their portfolios. One of the hedge fund industry’s biggest challenges is managers accepting assets well beyond the optimal capacity of their strategy.

Conclusion

As we move through 2026, this survey provides useful insight into where capital is likely to be allocated in response to shifting market conditions. While demand is favoring strategies that offer alpha generation and diversification, there is also a rotation away from certain fixed income strategies. At the same time, the growing openness to emerging managers highlights an increasing emphasis on agility, specialization, and capacity constrained strategies.

This article was co-authored by Don Steinbrugge, Corey Kennedy, and Chas Steinbrugge.