- October’s tech reversal hit big hedge funds. Marshall Wace’s Eureka strategy fell 5.4% last month, trimming its year-to-date gain to 5.3%, and its data-driven Tops strategy lost 3.6%, leaving it up 1.3% for the year, according to people who had seen the numbers. Izzy Englander’s $95 billion Millennium Management was down 2.3%, leaving it up 5.7% for the first 10 months.
- The industry broadly lost money. Global hedge funds lost 3% in aggregate in October, according to data provider PivotalPath, with equity strategies faring worst. Year-to-date gains for the industry are in the mid-single digits.
- Citadel bucked the trend. Ken Griffin’s flagship Wellington fund rose 1.7% in October and is up 15.3% for the year. Trend-following quant funds also held up: Graham Capital’s quant macro strategy is up 21.6% this year and Winton’s Diversified Macro fund is up 17.9%.
- The selloff was rooted in AI doubts. The Nasdaq 100 fell into correction territory last week after dropping 10% from its Oct. 6 record as lackluster tech earnings raised questions about how long AI investments will take to pay off. Intel fell 29% in its worst one-day drop since 1974.
What Happened?
Marshall Wace and Millennium were among the hedge funds hit in October as worries about the sustainability of the AI boom triggered a sharp reversal in Wall Street’s tech rally. Funds had to navigate markets whipsawed by the war in Iran, AI bubble fears, rising interest rates and the US midterm elections. “It’s been an ugly week all around,” one prime broker said after the Nasdaq dropped 3.5% on Friday. Bond markets were also volatile, particularly in the eurozone, where French and Italian bonds sold off against German Bunds and swaps, producing big moves in relative value and spread trades popular with hedge funds.
Why It Matters?
Multistrategy and equity long-short funds use leverage to magnify gains, so a fast rotation out of crowded AI trades can turn into sharp losses. The dispersion in October results, from Citadel’s gain to Eureka’s 5.4% drop, shows how much outcomes depend on positioning and risk management in a market where AI winners suddenly reversed. Graham’s human-led absolute-return strategy fell 1.8%, leaving it up just 1.2% for the year, while quant macro funds that ride trends in bonds and commodities have been among 2026’s winners.
What’s Next?
Investors will watch whether losses at equity-focused funds widen or stabilize in November. The US midterm results, rate expectations and the Iran conflict remain the main macro risks for hedge fund positioning. Marshall Wace, Millennium, Citadel and Winton declined to comment.
Affected Tickers and Coins: QQQ, INTC
Source: Financial Times
