Tech selloff wipes out hedge fund gains, prompting risk cuts and layoffs
QQQ•A global equity selloff led by technology stocks erased year-to-date gains at many hedge funds, prompting some managers to cut risk and staff. Tech-focused equity long-short funds fell more than 4% on Thursday, leaving returns for the year roughly flat, Goldman Sachs estimates showed.
1. Funds cut risk and staff
Walleye Capital, a $17 billion multi-strategy hedge fund, said in an investor letter that it would trim its internal equity long-short business and reduce a substantial portion of its equity investment team. The fund said it planned to return a portion of its capital after its worst month since March 2020.
2. Losses deepen across strategies
Global fundamental long-short managers fell 1.3% on average on Thursday, while multi-strategy managers dropped 1.4%, Goldman Sachs estimates showed. Tech-focused equity long-short funds had gained as much as 24% in June before the AI-driven selloff, but their returns for the year were now roughly flat.
3. October selloff weighs
The Nasdaq 100 fell 6.6% in October, its biggest monthly decline in 18 months, and JPMorgan estimated global hedge funds lost 3% that month. Market participants said large multi-manager platforms had cut leverage and laid off loss-making teams in recent weeks, with further layoffs expected if declines continued.
