Hedge funds see May returns boosted by buoyant markets, sources say

• Stock-picking hedge funds returned 5.35% in May versus 4.55% for the MSCI total return index, while systematic trading funds gained 0.84%
• Hedge funds bought information technology, consumer discretionary, financials, and industrials stocks at the fastest pace since June 2025, with total borrowing increasing at one of the fastest rates in five years
• Major multi-strategy funds like Schonfeld and Millennium posted returns of 2.6% and 2.4% respectively, as crowded long positions and momentum trading amplified gains

Summary

Hedge funds delivered strong performance in May 2026, with stock-picking funds outpacing global benchmarks as U.S. tech-sector gains drove returns higher. According to Goldman Sachs data, equity long-short hedge funds returned 5.35% versus the MSCI total return index's 4.55% gain.

Key Performance Metrics:

• Stock-picking hedge funds: +5.35%
• Systematic stock trading funds: +0.84%
• Multi-strategy funds: Schonfeld (+2.6%), Millennium (+2.4%)
• S&P 500: Ninth consecutive weekly gain, longest winning streak on record

Market Activity:

Hedge funds purchased stocks at the fastest pace since June 2025, with buying concentrated in information technology, consumer discretionary, financials, and industrials. Energy, communications services, and consumer staples were net sold. The rally was partly fueled by optimism around progress toward a peaceful resolution of the Iran war.

Leverage Concerns:

Goldman Sachs reported total borrowing increased at one of the fastest rates in five years, pushing hedge fund leverage to a five-year high. This elevated leverage amplified gains as crowded long positions created momentum that reinforced winning trades.

Market Implications:

The combination of strong performance, aggressive positioning, and record-high leverage suggests heightened risk in the market. While tech sector strength benefited most strategies, industrial positions generated losses. The concentration of bullish bets and elevated leverage could amplify volatility if market sentiment shifts, making the current positioning potentially vulnerable to sudden reversals.