Key Takeaways
- • Systematic long-short hedge funds, which follow market trends, posted a 2% decline in their worst week since 2024, according to a Goldman Sachs note seen by Reuters.
- • The Nasdaq 100 fell 5.5% last week, its biggest weekly drop since April 2025, as concern over the payoff from heavy AI spending drove volatility across stocks and bonds.
- • Meta shares slid 10% for the week after it said it would need to raise more capital to fund AI investments, despite strong earnings.
- • Goldman's prime brokerage desk logged $20 billion of tech stock selling over the past two weeks, close to the $23 billion unwind seen in July.
- • Fundamental long/short strategies fell 1.1% last week and are down 3.8% in October, though still up 8.8% year to date.
Summary
Trend-following hedge funds recorded their worst weekly performance in two years last week, as worries about the eventual returns on heavy AI spending triggered volatility in both equities and bonds, according to a Goldman Sachs note seen by Reuters on Monday. Systematic long-short strategies, whose algorithms ride market trends until they fade, lost 2% over the period, their weakest week since 2024. Fundamental long/short strategies declined a further 1.1%.
The sell-off was concentrated in technology. The Nasdaq 100, which contains the world's largest technology companies, dropped 5.5% for the week, its steepest weekly decline since April 2025, when US President Donald Trump's Liberation Day tariffs roiled global markets. Meta's shares fell 10% over the week after the company reported strong earnings but indicated it would need to raise additional capital for its AI investments, a development that unsettled investors.
Bond markets were also volatile. Investors moved into US Treasuries for relative safety while selling debt of more fragile economies such as France.
Positioning data in the note pointed to broad de-risking. Single stocks saw their largest de-gross activity, a general pulling back in positions, since late July. US equities have been net sold for three straight weeks and in four of the last five weeks. Goldman's prime brokerage desk reported $20 billion of selling in tech stocks over the last two weeks, close to the $23 billion unwind seen in July. Fundamental long/short strategies are down 3.8% for October so far but remain up 8.8% for the year, while systematic strategies are down 1.1% in October and up 18.7% year to date.
The sell-off was concentrated in technology. The Nasdaq 100, which contains the world's largest technology companies, dropped 5.5% for the week, its steepest weekly decline since April 2025, when US President Donald Trump's Liberation Day tariffs roiled global markets. Meta's shares fell 10% over the week after the company reported strong earnings but indicated it would need to raise additional capital for its AI investments, a development that unsettled investors.
Bond markets were also volatile. Investors moved into US Treasuries for relative safety while selling debt of more fragile economies such as France.
Positioning data in the note pointed to broad de-risking. Single stocks saw their largest de-gross activity, a general pulling back in positions, since late July. US equities have been net sold for three straight weeks and in four of the last five weeks. Goldman's prime brokerage desk reported $20 billion of selling in tech stocks over the last two weeks, close to the $23 billion unwind seen in July. Fundamental long/short strategies are down 3.8% for October so far but remain up 8.8% for the year, while systematic strategies are down 1.1% in October and up 18.7% year to date.
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