The manager says supply shocks, higher rates, and AI spending could create fertile ground for hedge funds.
Until recently, investors believed AI would force companies to rethink their business models, fuel productivity growth — and ultimately push inflation lower.
That’s all changed, at least for the time being, according to BlackRock’s Spring 2026 hedge fund outlook released today.
The asset manager argues that not only are the investments that companies need to make in chips, metals, energy infrastructure, and data centers massive, with about $5 trillion worth of capital expenditures expected through 2030. But there are not enough of those supplies to go around. The ingredients to take advantage of AI are “finite and bottlenecked” while revenues and productivity gains are still years away.
BlackRock does expect that AI will eventually boost productivity, but the payoff may be uneven and could come with higher real interest rates, not lower ones. And the asset manager expects AI investments — and the price increases associated with the spending — to continue to rise though the decade, with the benefits coming in the 2030s.
According to research firm PivotalPath, from 2000 to 2025, when 10-year Treasury yields averaged between roughly 3 percent and 6 percent, the PivotalPath Composite Index, which includes more than 40 strategies, annualized 12 percent, compared with about 9 percent for the S&P 500. Multi-strategy and relative value hedge fund indices returned 13 percent and 13.1 percent, respectively, beating equity quant strategies (7.7 percent) in higher rate regimes.
By contrast, in low-rate environments — a yield at 3 percent or below, hedge fund returns were more muted and equities dominated. PivotalPath’s Composite Index annualized 7.7 percent; multi-strategy and relative value returned 7.1 and 6.5 percent, respectively.