Key Takeaways
- • Walleye Capital, which manages more than $17 billion, will shrink its internal equity long-short business and return some capital to investors after posting a 5.9% loss in October and a 6.8% year-to-date loss through October.
- • Anil Gondi, head of equities, and a substantial portion of the equity-investing team are leaving Walleye as the firm scales back the business.
- • The Nasdaq 100 fell about 6.4% on Nov. 5, its biggest one-day drop since March 2020, while the S&P 500 dropped 4.36%, erasing roughly $3 trillion in market value.
- • Goldman Sachs told clients in a prime-brokerage note that large multi-strategy hedge funds are excessively exposed to megacap AI stocks and are suffering substantial losses.
Summary
Walleye Capital plans to shrink its equities operation and return some capital to investors following a sharp selloff in U.S. artificial intelligence stocks, according to Bloomberg. The firm, which manages more than $17 billion, is simplifying its internal equity long-short business, a strategy that combines long positions with short sales based on views on individual stocks. Walleye posted a 5.9% loss in October alone, its worst monthly performance since March 2020, and its year-to-date loss widened to 6.8% through the end of the month.
In a letter, Chief Investment Officer Will England said the internal equity long-short business has been the weakest part of the firm's strategy since 2023 and has significantly lagged the firm's external long-short business. Walleye will concentrate on core strategies including volatility investing, quantitative investing and external asset-management operations. Anil Gondi, head of equities, and a substantial portion of the equity-investing team are leaving the firm. The firm said it will return part of its managed assets after reviewing the appropriate size of the fund.
The broader market stress came on Nov. 5, when the Nasdaq 100 sank about 6.4% in New York, its largest one-day decline since the Covid-19 shock in March 2020. The S&P 500 fell 4.36%, wiping about $3 trillion off the market value of its constituent companies in a single session. The selloff in AI shares was triggered by concerns that a Democratic landslide in the midterm elections could lead to tighter regulation of data centers. Some analysts say unwinds of positions concentrated in AI shares amplified the losses.
Reuters reported that Goldman Sachs told clients in a prime-brokerage note that large multi-strategy hedge funds were excessively exposed to megacap AI stocks and were suffering substantial losses, adding pressure to the broader market.
In a letter, Chief Investment Officer Will England said the internal equity long-short business has been the weakest part of the firm's strategy since 2023 and has significantly lagged the firm's external long-short business. Walleye will concentrate on core strategies including volatility investing, quantitative investing and external asset-management operations. Anil Gondi, head of equities, and a substantial portion of the equity-investing team are leaving the firm. The firm said it will return part of its managed assets after reviewing the appropriate size of the fund.
The broader market stress came on Nov. 5, when the Nasdaq 100 sank about 6.4% in New York, its largest one-day decline since the Covid-19 shock in March 2020. The S&P 500 fell 4.36%, wiping about $3 trillion off the market value of its constituent companies in a single session. The selloff in AI shares was triggered by concerns that a Democratic landslide in the midterm elections could lead to tighter regulation of data centers. Some analysts say unwinds of positions concentrated in AI shares amplified the losses.
Reuters reported that Goldman Sachs told clients in a prime-brokerage note that large multi-strategy hedge funds were excessively exposed to megacap AI stocks and were suffering substantial losses, adding pressure to the broader market.
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