Economy June 5, 2026 08:55 AM

Hedge Funds Outperform Benchmarks in May as Tech-Led Equity Rally Lifts Returns

Stock-pickers led gains while leverage and crowded longs rose to multiyear highs, Goldman Sachs notes

By Caleb Monroe

Hedge funds, especially those focused on equities, outpaced market benchmarks in May as a rally led by U.S. technology shares boosted returns. Stock-picking strategies recorded stronger gains than the MSCI total return index, while systematic stock funds also posted positive returns. Rising borrowing and concentrated long positions amplified the move.

Hedge Funds Outperform Benchmarks in May as Tech-Led Equity Rally Lifts Returns

Key Points

  • Stock-picking hedge funds returned 5.35% in May versus a 4.55% gain for the MSCI total return index - sectors most bought included information technology, consumer discretionary, financials and industrials.
  • Systematic equity trading hedge funds returned 0.84% in May; technology aided both discretionary and systematic approaches.
  • Leverage and borrowing rose sharply - total borrowing increased at one of the fastest rates Goldman has recorded in the last five years, leaving hedge fund leverage at a five-year high.

Hedge funds trading equities delivered notable outperformance in May as a global equity upswing - driven in large part by U.S. technology names - supported returns across managers, according to a note from Goldman Sachs.

Stock-picking hedge funds returned 5.35% in May compared to the MSCI total return index, which posted a 4.55% gain, said a note from Goldman Sachs. The S&P 500 closed May having recorded its ninth straight weekly advance, the longest such streak since December 2023, a run that was in part fuelled by hopes for progress towards a peaceful resolution of the Iran war.

Goldman reported that hedge funds jumped into the May market rally and bought equities at the fastest pace since June 2025. In particular, speculators increased exposure to information technology, consumer discretionary, financials and industrials stocks. On balance, energy, communications services and consumer staples were the sectors that saw net selling, the note said.

The note highlighted that crowded long trading positions contributed to gains as the number of investors continuing to buy stocks pushed prices higher and created momentum that amplified winning bets. A long position is a bet that an asset will rise in value.

While sectors such as technology supported both stock pickers and systematic traders, Goldman said some losses were linked to positions on industrial firms.

Systematic stock trading hedge funds returned 0.84% in May, said the note, adding that total borrowing increased at one of the fastest rates recorded by Goldman in the last five years. Hedge fund leverage now stands at a five-year high, the note found.

Among large multi-strategy managers, Schonfeld and Millennium posted returns of 2.6% and 2.4%, respectively, in May, the note reported.


This account synthesises the figures and sector patterns Goldman Sachs identified for May performance across hedge fund strategies. The data highlight the dual role of sector leadership - led by tech - and elevated leverage and crowding in shaping returns during the month.

Risks

  • Crowded long positions can amplify both gains and subsequent losses if momentum reverses - sectors affected include information technology and industrials.
  • Rising borrowing and leverage increase vulnerability to market swings and margin pressure - this could impact multi-strategy and equity-focused hedge funds.
  • Net selling in energy, communications services and consumer staples suggests sector rotation that may produce short-term volatility across those parts of the market.

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