Key Takeaways
- • Walleye Capital, a New York-based $17 billion multi-strategy hedge fund, intends to scale back its in-house long-short equity investment unit and a significant part of its equities team, according to a letter to investors reviewed by Reuters.
- • The fund reassessed every aspect of its operations after its worst month since March 2020 and plans to return part of its capital to investors.
- • Goldman Sachs estimates long-short funds focused on technology lost more than 4% in one day, with year-to-date returns falling to roughly zero from a 24% peak in June.
- • The Nasdaq 100 fell 6.6% in October, its biggest monthly decline in 18 months; JPMorgan estimates global hedge fund losses for October at 3%.
- • Market participants report several large multi-manager platforms have already cut leverage and laid off teams, with further cuts expected if the downturn continues.
Summary
New York-based multi-strategy hedge fund Walleye Capital, with $17 billion in assets, said it intends to scale back its in-house long-short equity investment unit and a significant part of its equities team. The decision, detailed in a letter to investors reviewed by Reuters and reported by Channel NewsAsia, follows what the fund described as its worst month since March 2020. Walleye also plans to return part of its capital, and said it had reassessed every aspect of its operations.
The move comes amid a global stock sell-off led by the technology sector that has erased many hedge funds' gains since the start of the year. According to Goldman Sachs estimates, long-short funds that primarily invest in technology companies lost more than 4% in a single day, and their year-to-date returns fell to approximately zero, after reaching a peak of 24% in June before the sell-off in stocks linked to artificial intelligence. Global fundamental long-short managers lost an average of 1.3% on Thursday, while multi-strategy managers lost 1.4%, Goldman Sachs said.
Broader market declines compounded the losses. The Nasdaq 100, which includes large technology companies, fell 6.6% in October, its biggest monthly decline in 18 months. JPMorgan estimated global hedge fund losses for October at 3%.
According to market participants, several large multi-manager hedge fund platforms have already reduced leverage and laid off teams with loss-making results in recent weeks, and they expect further cuts if the downturn persists. Research firm PivotalPath warned of significant and increasing overlap in the positions of the 10 largest multi-strategy hedge funds, noting that a simultaneous exit from positions could affect many of the same securities.
The move comes amid a global stock sell-off led by the technology sector that has erased many hedge funds' gains since the start of the year. According to Goldman Sachs estimates, long-short funds that primarily invest in technology companies lost more than 4% in a single day, and their year-to-date returns fell to approximately zero, after reaching a peak of 24% in June before the sell-off in stocks linked to artificial intelligence. Global fundamental long-short managers lost an average of 1.3% on Thursday, while multi-strategy managers lost 1.4%, Goldman Sachs said.
Broader market declines compounded the losses. The Nasdaq 100, which includes large technology companies, fell 6.6% in October, its biggest monthly decline in 18 months. JPMorgan estimated global hedge fund losses for October at 3%.
According to market participants, several large multi-manager hedge fund platforms have already reduced leverage and laid off teams with loss-making results in recent weeks, and they expect further cuts if the downturn persists. Research firm PivotalPath warned of significant and increasing overlap in the positions of the 10 largest multi-strategy hedge funds, noting that a simultaneous exit from positions could affect many of the same securities.
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