Key Takeaways
- • Global fundamental long-short equity funds lost 2.9% in the week to October 15, 2026, with losses on every trading day, according to a Goldman Sachs prime brokerage note cited by Reuters.
- • Asia-focused stock pickers have lost 6.8% so far in the first half of October and have erased more than half of their gains from a late-June peak, when they were up more than 40% for the year.
- • Global AI stocks have been sold by long-short fund managers for six straight sessions, as investors question whether heavy AI spending can pay off soon amid elevated inflation.
- • Goldman Sachs noted that the three broad hedge fund strategies have now experienced single-day drops of more than 80 bps three times this year: February 4, July 28 and October 15.
- • South Korea's benchmark fell 8% to a six-month low on Thursday, while Taiwan stocks lost more than 3%, as hotter-than-expected US inflation data raised expectations of further rate hikes.
Summary
Global hedge funds suffered steep losses this week, battered by a sharp unwind of a broad set of AI-related positions, with Asia-focused funds hit hardest, according to Reuters. Wall Street ended the week sharply lower on Friday, with AI-related technology stocks under renewed pressure, while a jump in oil prices weighed on traders heading into the weekend. Investors are increasingly questioning whether massive AI spending can pay off soon as elevated inflation keeps borrowing costs high.
Goldman Sachs' prime brokerage unit said in a client note that global fundamental long-short funds, or stock pickers, lost money every day this week, with losses for the week to October 15 reaching 2.9%. Year to date, these funds remain up 14.3%. Goldman described Wednesday's sharp AI unwind and a continued but slower pace of net selling on Thursday, driven by long sales outpacing short covers. Dollar de-grossing on Thursday was roughly half of Wednesday's level. Global AI stocks have been sold by long-short managers for six straight sessions.
On Thursday, stock pickers globally lost 0.9%, Asia-focused managers fell 2.6% and tech-focused funds declined 2.0%. Global systematic long-short and multi-strategy funds each fell roughly 1%. Goldman noted that from COVID through the end of 2025, its three broad strategies never fell more than 80 bps on the same day, a threshold breached three times this year.
Bruno Schneller, managing partner at Erlen Capital Management, which invests in hedge funds, described the move as "less a fundamental rejection of AI and more a classic, high-velocity unwind of a crowded trade meeting a macro reality check." He said hotter-than-expected US inflation data forced markets to reassess the path of interest rates, pressuring the most capital-intensive parts of the AI complex. Semiconductor and AI supply chain stocks declined as the data raised expectations of further rate hikes. South Korea's benchmark tumbled 8% to close at a six-month low on Thursday, and Taiwan stocks lost more than 3%.
CoreWeave, the data center operator, was among the biggest casualties, with its bonds selling off sharply this week and pushing yields above 15%. Goldman data show Asia-focused stock pickers have erased more than half of their late-June gains. Schneller added that the selloff exposed how much of the hedge fund industry has been trading the same underlying theme, even when portfolios look different on paper.
Goldman Sachs' prime brokerage unit said in a client note that global fundamental long-short funds, or stock pickers, lost money every day this week, with losses for the week to October 15 reaching 2.9%. Year to date, these funds remain up 14.3%. Goldman described Wednesday's sharp AI unwind and a continued but slower pace of net selling on Thursday, driven by long sales outpacing short covers. Dollar de-grossing on Thursday was roughly half of Wednesday's level. Global AI stocks have been sold by long-short managers for six straight sessions.
On Thursday, stock pickers globally lost 0.9%, Asia-focused managers fell 2.6% and tech-focused funds declined 2.0%. Global systematic long-short and multi-strategy funds each fell roughly 1%. Goldman noted that from COVID through the end of 2025, its three broad strategies never fell more than 80 bps on the same day, a threshold breached three times this year.
Bruno Schneller, managing partner at Erlen Capital Management, which invests in hedge funds, described the move as "less a fundamental rejection of AI and more a classic, high-velocity unwind of a crowded trade meeting a macro reality check." He said hotter-than-expected US inflation data forced markets to reassess the path of interest rates, pressuring the most capital-intensive parts of the AI complex. Semiconductor and AI supply chain stocks declined as the data raised expectations of further rate hikes. South Korea's benchmark tumbled 8% to close at a six-month low on Thursday, and Taiwan stocks lost more than 3%.
CoreWeave, the data center operator, was among the biggest casualties, with its bonds selling off sharply this week and pushing yields above 15%. Goldman data show Asia-focused stock pickers have erased more than half of their late-June gains. Schneller added that the selloff exposed how much of the hedge fund industry has been trading the same underlying theme, even when portfolios look different on paper.
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