Q1 2026 Investor Letters: What the Top Funds Are Saying

The first quarter of 2026 proved one of the most punishing in recent memory for markets — the S&P 500 posted its worst quarter since 2022, falling 4.6%, while tariff uncertainty, AI capex skepticism, and credit concerns rattled positioning across strategies. But a handful of major investors were well-prepared, and their letters offer an unusually candid window into how the best minds in the industry are thinking about what comes next.

Q1 2026 Performance Snapshot

Returns across the major names were sharply divided. Macro-oriented funds and those with short books fared best; long-biased multi-strats had a rough quarter.

Greenlight Capital — Einhorn Turns Bearish, Gold Delivers

David Einhorn's Greenlight Capital was one of the standout performers of the quarter, gaining +8.2% versus the S&P 500's –4.3% — a 12.5-point alpha gap. The macro book was the key driver, led by a 19% surge in gold, which Greenlight holds through both physical bars and call options. The long portfolio was modestly negative (–1.3%), but shorts contributed +5.3% and macro added another +5.3%.

The more notable signal was a strategic shift in late February. Greenlight wrote that it had "pivoted from conservative but not bearish, to bearish," cutting net long exposure to just 19% (86% long, 67% short) by quarter-end. Einhorn's letter stated: "We suspect we are now in a bear market that is just starting." With gold gaining another 6.2% in April, the positioning appears to have extended into the new quarter.

Pershing Square — Ackman Absorbs a Tough Quarter

Pershing Square Holdings (PSH) ended Q1 down 13.9% year-to-date through March 10, as its concentrated long book — heavily weighted toward mega-cap compounders — faced headwinds from the broader de-rating in high-multiple equities. The firm's February 2026 Annual Investor Presentation framed the year-to-date performance in the context of a longer-term compounding thesis, noting active share repurchases of PSH shares at a discount to NAV.

Separately, Ackman has been pursuing a major strategic initiative: a public listing of Pershing Square Capital Management itself on the NYSE, targeting a raise of $5–10 billion. A Fortune profile in March described Ackman's ambition to build a "modern-day Berkshire Hathaway." The Q1 drawdown complicates the IPO narrative in the short run, but PSH continues to trade at a material discount to NAV — which Ackman argues is the opportunity.

Howard Marks — A Warning on Private Credit

Howard Marks published two significant memos in Q1. The first, "AI Hurtles Ahead" (February 2026), charted the progression of AI from basic assistance (Level 1, 2023) to fully autonomous agents (Level 3, early 2026) — a shift Marks described as moving faster than most investors had priced. He noted consulting Anthropic's Claude to write a tutorial on AI developments, calling the technology's acceleration "remarkable."

The more market-relevant memo arrived in April: "What's Going on in Private Credit?" Marks argued that the $2 trillion direct lending market is now facing its first serious stress test since the GFC. The concerns:

Despite the warnings, Marks concluded there is "no systemic problem" in private credit — rather, a targeted correction in over-leveraged software and lower-quality direct lending vintages. Selective managers with higher underwriting standards should be fine.

Man Group — "Too Hard to Price"

Man Group's Q1 2026 Hedge Fund Strategy Outlook was titled "Too Hard to Price?" — a phrase that captured the quarter's defining challenge. Three forces dominated: geopolitics (tariffs, Middle East tensions), monetary policy uncertainty (the next Fed chair, diverging rate paths), and AI capex skepticism (concerns about uncertain business models priced into the market).

Man upgraded its outlook for three strategies heading into Q2: Long-Biased Equity L/S, Market Neutral Equity L/S, and Merger Arbitrage (driven by record M&A activity). The only negative-rated strategy remains Distressed Credit — too early to offer attractive risk/reward. The core thesis: elevated dispersion and lower single-stock correlations create a fertile environment for active stock selection, even if calling market direction is difficult.

Common Themes Across the Season

This post summarizes publicly available investor letters, memos, and performance reports. Sources include Hedgeweek, Reuters, HedgeCo, Oaktree Capital, Man Group, and public NAV disclosures. Not investment advice.