- Global hedge funds suffered one of their broadest declines since the Covid pandemic after Thursday’s stock selloff, according to Goldman Sachs’ prime brokerage desk. “For the first time since Covid, all three broad equity strategies fell more than 1% on the same day,” the firm said in a note to clients.
- Global fundamental long/short managers fell 1.4% on Thursday, their worst day since July 16, while funds focused on telecommunications, media and technology dropped 2.7% on average. Global systematic long/short managers lost 1.3%, their third-worst day since December 2023.
- Multistrategy platforms, the pod shops designed to protect against firm-wide drawdowns, slid 1.9% for their second-worst day since the April 2025 tariff selloff. Goldman estimated that more than two-thirds of hedge funds finished the day down.
- Asia fundamental long/short managers are down 9.3% month to date. Their returns remain broadly positive this year at 14.2%, according to the note.
What Happened?
Hedge funds across styles lost money on Thursday as US tech stocks were sold heavily on mounting concerns over whether massive AI spending will bear fruit, Bloomberg reported, citing Goldman Sachs’ prime brokerage. Losses deepened in the second half of the session as concentrated short positions were squeezed further, according to the prime brokerage. The Nasdaq 100 slid 2.9% on the day, the most since June, as fears over oil-induced inflation added to the pressure. Even bearish positions did not necessarily pay off during a volatile earnings season.
Why It Matters?
The breadth of the losses is the key signal, since long/short, systematic and multistrategy funds rarely all fall more than 1% on the same day. Multistrategy pod shops are built to limit firm-wide drawdowns, so a 1.9% drop shows how hard it was to find shelter in this selloff. The short squeeze in the afternoon meant managers were hit on both sides of their books, losing on longs while their shorts rallied. TMT-focused funds took the biggest hit, reflecting how concentrated hedge fund exposure is in the AI trade.
What’s Next?
Investors will watch whether losses force managers to cut gross exposure, which could add to selling pressure if the tech rout continues. Prime brokerage data in the coming days will show whether Thursday was a one-off or the start of broader deleveraging. The volatile earnings season continues, with tech results remaining the main driver of positioning. For Asia managers, the 9.3% month-to-date decline has already eaten into otherwise solid year-to-date gains.
Affected Tickers and Coins: GS, QQQ
Source: Bloomberg
