Key Takeaways
- • Global fundamental long-short equity funds fell 2.9% in the week to 15 October, recording losses every day, though the strategy remains up 14.3% year to date, according to Reuters citing Goldman Sachs prime brokerage data.
- • Asia-focused fundamental long-short managers have lost 6.8% in the first half of October, surrendering more than half of the gains made at their late-June peak, when year-to-date returns exceeded 40%.
- • Goldman Sachs said simultaneous losses across all three broad hedge fund strategies have occurred three times in 2026 (4 February, 28 July and 15 October), versus no single-day declines above 80bps from COVID through end-2025.
- • The sell-off was driven by doubts over whether heavy AI infrastructure spending will generate adequate returns, compounded by hotter-than-expected US inflation data that raised expectations of further rate hikes.
- • South Korea's KOSPI fell 8% on Thursday to a six-month low, and Taiwan's market declined more than 3%, as semiconductor and AI supply-chain stocks were hit hardest.
Summary
Global hedge funds posted sharp losses this week as a sell-off in artificial intelligence-related equities forced widespread unwinding of positions, with Asia-focused managers among the hardest hit, according to a Reuters report citing Goldman Sachs prime brokerage data. Global fundamental long-short equity funds declined every day of the week, falling 2.9% in the period to 15 October. Despite the drawdown, the strategy remains up 14.3% year to date.
Wednesday produced the heaviest losses across hedge fund strategies. Global fundamental long-short managers declined 0.9% on the day, Asia-focused funds fell 2.6% and technology-focused managers lost 2.0%. Global systematic long-short and multi-strategy funds also declined by roughly 1%.
The selling was attributed to growing investor concern that large investment in AI infrastructure may not generate sufficient returns, compounded by higher-than-expected US inflation data that increased expectations of further interest rate hikes. Semiconductor stocks and companies exposed to the AI supply chain were particularly affected. South Korea's KOSPI index fell 8% on Thursday to a six-month low, while Taiwan's stock market declined more than 3%.
Goldman Sachs highlighted the unusual breadth of the losses. The bank said that from COVID through end-2025, all three broad hedge fund strategies never fell more than 80bps on the same day, but such declines have now occurred three times in 2026, on 4 February, 28 July and 15 October.
Asia-focused fundamental long-short managers have lost 6.8% in the first half of October, reversing a substantial portion of earlier gains. According to Goldman Sachs, the strategy has surrendered more than half of the gains recorded at its late-June peak, when year-to-date returns exceeded 40%.
Wednesday produced the heaviest losses across hedge fund strategies. Global fundamental long-short managers declined 0.9% on the day, Asia-focused funds fell 2.6% and technology-focused managers lost 2.0%. Global systematic long-short and multi-strategy funds also declined by roughly 1%.
The selling was attributed to growing investor concern that large investment in AI infrastructure may not generate sufficient returns, compounded by higher-than-expected US inflation data that increased expectations of further interest rate hikes. Semiconductor stocks and companies exposed to the AI supply chain were particularly affected. South Korea's KOSPI index fell 8% on Thursday to a six-month low, while Taiwan's stock market declined more than 3%.
Goldman Sachs highlighted the unusual breadth of the losses. The bank said that from COVID through end-2025, all three broad hedge fund strategies never fell more than 80bps on the same day, but such declines have now occurred three times in 2026, on 4 February, 28 July and 15 October.
Asia-focused fundamental long-short managers have lost 6.8% in the first half of October, reversing a substantial portion of earlier gains. According to Goldman Sachs, the strategy has surrendered more than half of the gains recorded at its late-June peak, when year-to-date returns exceeded 40%.
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