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At the time of publishing, a good chunk of you will be gearing up for a trip to Miami at the end of January for the industry’s annual sojourn to south Florida. The good ship EFSI will be there too, of course, as co-producers of Uncorrelated Miami 2026.
Equity hedge fund managers are likely feeling particularly bullish about their chances of meeting someone who might write them a check. According to industry database HFR, the average equity hedge fund is coming off a year in which it delivered returns of 17.3%; and 2025 itself came after two years of more than double-digit gains (2024: +11.87%, 2023: +11.37%).
But survivorship bias, I hear you cry! I know, I know – but the recent ‘return’ to double digit returns is a welcome one for the hedge fund space, and equity hedge strategies in particular, which bore the brunt of the ZIRP decade in terms of allocations; the post-GFC Era of 2009–2019, characterized by ultra-low interest rates, quantitative easing, and a strong beta-driven equity rally made it harder for equity hedge funds to outperform passive benchmarks because dispersion among stocks was low.
But recent years have delivered higher volatility, sector rotations, and macro uncertainty (inflation, rate hikes), creating more opportunities for active managers to exploit mispricing. And there are reasons to believe that the investing environment is one which could continue to support the equity hedge category. Structural tailwinds such as persistent stock dispersion, higher-for-longer rates, and enduring volatility create fertile ground for active strategies while the continued adoption of AI and alternative data will likely widen performance gaps, favoring agile managers who can exploit dislocations and deliver uncorrelated returns.
It’s a good story that can be told to an allocator, especially for those funds that were investing through the 2010s, and/or portfolio managers that were doing it that have now branched out on their own. And it’s a believable one, too – which is just as important.
And allocators are increasingly seeking differentiated sources of alpha, and managers who can articulate a clear edge, whether through technology, risk management, or niche expertise, will stand out in what is becoming an increasingly crowded field.
HFR said back in October that the number of new funds out there looking for capital in the first half of last year was 262, which, at the time, made 2025 on pace to provide the highest number of launches since 2021. This uptick in launches underscores renewed confidence in the space but also signals that allocators have more choices than ever. Differentiation through strategy, transparency, and performance consistency will be critical.
Add to that the reality that hedge funds looking for capital face a more onerous operational due diligence process than perhaps ever before, extending the sales cycle and distracting the PM from the task at hand, makes capital raising more intense than ever before and it becomes clear why good numbers will not be enough to secure a commitment.
So, even those funds armed with double digit returns won’t find it easy to raise money this year. But let’s enjoy the positives, which is three consecutive years of double-digit returns. EFSI got its start in the emerging hedge fund manager space, and as an industry champion, we’re naturally pleased to see a return to fine form.
Good luck – not only to those on the capital raising trail in Miami, but to all, for the year ahead.
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Anthony D. Mascia is Managing Partner at EFSI. Connect with him on LinkedIn here.
EFSI is an independently owned, SOC-1 compliant, full-service fund administration firm. We provide accounting, reporting, administrative, and capital introduction services to a wide range of alternative investment funds including hedge funds, funds of funds, private equity funds, real estate funds, venture capital funds, and family offices. The center of EFSI’s service incorporates resilient technology and accomplished staff, providing clients a tailor-made service with exhaustive transparency. Give us a call today or reach out to our support team online. We look forward to hearing from you soon.