Following a challenging first quarter in 2026, global equity markets have shown a broad recovery amid persistent volatility, largely driven by strong investment in AI computing infrastructure. Leading the performance among hedge funds in the first half of the year were strategies from smaller, stock-picking and event-driven funds, which captured the strongest alpha returns.
The term "alpha" refers to investment returns that significantly exceed "beta returns," which are the gains achieved by simply tracking a benchmark index.
Reports citing informed sources indicate that over the six months to June, the CastleKnight and Melqart Opportunities hedge funds delivered robust returns of 42.3% and 29.1%, respectively. Meanwhile, Asia-focused equity funds targeting leaders in the AI computing supply chain, TAL China Focus and Keystone, achieved remarkable alpha returns of 95.1% and 62.7% during this period, according to those sources.
For instance, shares of the world's largest memory chipmaker, SK Hynix, traded on the Seoul market, surged approximately 850% over the past 12 months, propelling its market capitalization above $1 trillion and briefly surpassing that of long-time leader Samsung Electronics.
This week, SK Hynix filed a revised F-1 registration statement with the U.S. Securities and Exchange Commission (SEC) to list its shares on the Nasdaq. The company plans to list its American Depositary Shares under the ticker "SKHY." Based on the proposed fundraising size, this ADR issuance could rank among the top three equity offerings in global market history. According to compiled data, its scale could be comparable to Saudi Aramco's $29.4 billion mega-IPO in 2019, while the largest IPO remains the unparalleled fundraising of at least $75 billion for SpaceX, founded by Elon Musk.
Among the largest multi-strategy platform hedge fund managers, Citadel's Wellington fund rose 1.8% in June, bringing its year-to-date return to 5.7%. Millennium Management gained 4.1% last month, resulting in a first-half increase of 10.5%. The Torus fund from Qube Research & Technologies advanced 7.8% in June, pushing its six-month return to 18.6%.
Representatives for all the aforementioned funds declined to comment.
Following a severe global equity sell-off in March, hedge fund returns rebounded strongly in the second quarter, fueled by optimism over a potential end to Middle East geopolitical conflicts and continued explosive growth in AI computing demand. After a significant market sell-off in early April, markets embarked on a robust recovery trajectory in May and June, with the U.S. benchmark S&P 500 index posting its best quarterly performance since 2020.
Investor interest in allocating to higher-risk, higher-return hedge funds is also surging. A survey earlier this year indicated that, on a net basis, over half of investors are looking to increase their hedge fund exposure in 2026, making hedge funds the most favored asset class for allocation this year.
Performance Highlights of the First Half
In summary, smaller, more agile, and more concentrated stock-picking and event-driven funds captured the strongest excess alpha during the volatile first half. Asia-focused funds like TAL China Focus and Keystone recorded exceptionally high returns of 95.1% and 62.7%, respectively. The underlying investment strategy relies on high-conviction stock selection, regional allocation mismatches, event catalysts, concentrated positions, and rapid risk repricing amid macro shocks, tariff/geopolitical risks, AI valuation volatility, and sector rotation. This contrasts with the highly diversified, low-volatility, and heavily risk-controlled "platform arbitrage" approach of traditional multi-strategy giants.
Broader data supports this view. A prime brokerage client report noted that fundamental long/short equity funds rose 4% in June, delivering an 18.4% return for Q2—the strongest quarterly performance on record—and a year-to-date return of approximately 17.4%. In comparison, systematic model funds returned about 11.3% year-to-date, a solid performance but notably trailing fundamental stock pickers. The report also highlighted that sources of success included more aggressive positioning, healthcare sector bets, and trades incorporating momentum strategy combinations.
Essentially, the strategies that generated true excess alpha in the first half were fundamental equity long/short, event-driven, and momentum/sector dispersion trades, particularly from funds that quickly capitalized on the Q2 recovery in risk assets after the Q1 plunge. Multi-strategy platforms have not become ineffective, but in extreme reversal markets, their size, crowded trades, and risk-deleveraging controls can limit flexibility.
The Role of the AI Computing Theme
This excess alpha is indeed closely linked to the AI computing theme, but it is not simply a matter of "buying AI stocks to outperform peers." AI has been a significant backdrop for market volatility and performance dispersion in the first half: the broad AI computing supply chain—including AI semiconductors, memory chips, data center power infrastructure, optical interconnects, and server CPUs—has created substantial industry dispersion and stock-picking opportunities. Concurrently, some macro funds benefited from the strong rebound in AI tech and the repricing of assets following geopolitical shocks. However, the AI computing theme is not the sole answer. The real alpha stems from the combined ability to navigate the "AI trend + event catalysts + regional mismatches + active stock selection." In terms of investment insight, as the AI super-cycle enters a phase of heightened volatility, the most profitable players may not be the largest platform funds, but rather smaller, specialized funds that dare to concentrate holdings in winners, adjust portfolios swiftly, and identify under-the-radar winners within the AI computing infrastructure space.
Estimated Returns for Selected Global Hedge Funds
The following are estimated investment returns for some prominent and select global hedge funds, as reported by institutions.
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