Key Takeaways
- • Tech-focused equity long-short funds fell more than 4% on Thursday and are roughly flat for 2026, according to Goldman Sachs estimates cited by Reuters, after being up as much as 24% in June.
- • Walleye Capital, a $17 billion New York multi-strategy fund, will cut a substantial part of its equity investment team and return a portion of its capital to investors.
- • JPMorgan estimates global hedge funds lost 3% in October, when the Nasdaq 100 fell 6.6%, its biggest monthly drop in 18 months.
- • Goldman Sachs' John Flood says hedge funds are selling back hyperscaler positions they had recently bought, and PivotalPath warns of high crowding among the 10 largest multi-strategy funds.
Summary
A technology-led selloff has erased this year's gains at many hedge funds, prompting some managers to cut risk and staff, Reuters reported on Friday. Equity long-short funds that primarily invest in technology stocks fell more than 4% on Thursday, leaving their 2026 returns roughly flat, according to Goldman Sachs estimates cited by Reuters. Those funds had been up as much as 24% in June. Global fundamental long-short managers lost an average of 1.3% that day, and multi-strategy managers lost 1.4%. The selloff has pushed the Nasdaq into correction following an AI-led rout earlier in the week.
Walleye Capital, a $17 billion New York multi-strategy fund, told investors in a letter seen by Reuters that it will trim its internal equity long-short business, reduce a substantial portion of its equity investment team and "return a portion of our capital." The letter referred to the fund's worst month since March 2020 and a "challenging 2026."
Several large multi-manager platforms have cut leverage and laid off loss-making teams in recent weeks, and market participants told Reuters they expect further layoffs if declines continue. JPMorgan estimates global hedge funds lost 3% in October, a month in which the Nasdaq 100 fell 6.6%, its largest monthly decline in 18 months.
Goldman Sachs' John Flood wrote that many funds were caught wrong-footed after de-risking ahead of the midterms and chasing Wednesday's relief rally. He said "hedge funds are selling back pockets of the market (hyperscalers)" they had just bought. Research firm PivotalPath said it had "observed a high and increasing degree of overlap" among the 10 largest multi-strategy funds, meaning an unwind could hit many of the same stocks at once.
Walleye Capital, a $17 billion New York multi-strategy fund, told investors in a letter seen by Reuters that it will trim its internal equity long-short business, reduce a substantial portion of its equity investment team and "return a portion of our capital." The letter referred to the fund's worst month since March 2020 and a "challenging 2026."
Several large multi-manager platforms have cut leverage and laid off loss-making teams in recent weeks, and market participants told Reuters they expect further layoffs if declines continue. JPMorgan estimates global hedge funds lost 3% in October, a month in which the Nasdaq 100 fell 6.6%, its largest monthly decline in 18 months.
Goldman Sachs' John Flood wrote that many funds were caught wrong-footed after de-risking ahead of the midterms and chasing Wednesday's relief rally. He said "hedge funds are selling back pockets of the market (hyperscalers)" they had just bought. Research firm PivotalPath said it had "observed a high and increasing degree of overlap" among the 10 largest multi-strategy funds, meaning an unwind could hit many of the same stocks at once.
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