Key Takeaways
- • Hedge funds are cutting staff after a sharp sell-off in AI and data-centre-linked stocks, with Walleye cutting a large portion of its long-short equities team and Engineers Gate cutting most of its stock synthesis team, according to eFinancialCareers.
- • Crowded, highly correlated and leveraged positions are unwinding; the FT reported last month that the biggest hedge funds are 15-20 times levered when derivative exposures are included.
- • Hedge fund VARA fell 33% in October, and many funds other than Citadel lost money that month, per Bloomberg.
- • Goldman Sachs named 109 new partners, more than the 95 made in 2024 and the largest class since 2010, including 13 engineers, according to the Financial Times.
- • A family office manager in Zurich warned that falling losses could force risk managers to cut exposure, potentially triggering another wave of selling regardless of fundamentals.
Summary
Hedge funds experienced a sharp sell-off on the day covered by eFinancialCareers, with hedge fund coach Denise Shull describing the experience to Bloomberg as "being attacked in a parking lot by three thugs." John Flood, head of Americas execution services at Goldman Sachs, said client phones had been "exploding," though he characterised the calls as requests for "colour" that Goldman was not providing. The underlying driver was the unwinding of hedge fund pods amid a sell-off of stocks tied to the AI and data-centre boom.
The article notes that leverage across the industry has become a concern. The FT reported last month that, once derivative exposures are counted, the largest hedge funds run 15-20 times leverage. Crowded and highly correlated positions began unwinding as the sell-off intensified. Following a difficult October in which many funds, excluding Citadel, lost money, November has brought further job cuts: Walleye reduced a large portion of its long-short equities team, Engineers Gate cut most of its stock synthesis team, and Brevan Howard cut more credit traders. Unconfirmed reports suggest further cuts at other large funds.
The article contrasts this with market commentary from Scott Rubner at Citadel Securities, who said buyers were "coming back" and that there was "considerable capacity for investors to rebuild risk," and from David Solomon at Goldman Sachs, who said AI deal demand was "very robust." Yesterday's moves have led some to question whether the Anthropic IPO will proceed. Bruno Schneller, managing partner at a Zurich family office, told Bloomberg that rising losses could prompt risk managers to force funds to reduce exposure.
Separately, Goldman Sachs published a partner list of 109 people, above the 95 made partner in 2024 and the largest class since 2010, according to the Financial Times, which reported 13 engineers among the new partners. APAC partners rose from eight to 20, while Paris partners fell from five to three. The New York Post reported that Goldman had dropped its DEI metrics.
Other items in the coverage include ING's reported $500m sale of data-centre loans (Bloomberg), Samlyn Capital cutting analysts to refocus on financial stocks (Bloomberg), and UBS shedding more than 5,500 jobs since January and cutting outside consultant spending by more than $800m (FT). Hedge funds and other major investors spent more than $330m on the US midterm elections, according to the FT.
The article notes that leverage across the industry has become a concern. The FT reported last month that, once derivative exposures are counted, the largest hedge funds run 15-20 times leverage. Crowded and highly correlated positions began unwinding as the sell-off intensified. Following a difficult October in which many funds, excluding Citadel, lost money, November has brought further job cuts: Walleye reduced a large portion of its long-short equities team, Engineers Gate cut most of its stock synthesis team, and Brevan Howard cut more credit traders. Unconfirmed reports suggest further cuts at other large funds.
The article contrasts this with market commentary from Scott Rubner at Citadel Securities, who said buyers were "coming back" and that there was "considerable capacity for investors to rebuild risk," and from David Solomon at Goldman Sachs, who said AI deal demand was "very robust." Yesterday's moves have led some to question whether the Anthropic IPO will proceed. Bruno Schneller, managing partner at a Zurich family office, told Bloomberg that rising losses could prompt risk managers to force funds to reduce exposure.
Separately, Goldman Sachs published a partner list of 109 people, above the 95 made partner in 2024 and the largest class since 2010, according to the Financial Times, which reported 13 engineers among the new partners. APAC partners rose from eight to 20, while Paris partners fell from five to three. The New York Post reported that Goldman had dropped its DEI metrics.
Other items in the coverage include ING's reported $500m sale of data-centre loans (Bloomberg), Samlyn Capital cutting analysts to refocus on financial stocks (Bloomberg), and UBS shedding more than 5,500 jobs since January and cutting outside consultant spending by more than $800m (FT). Hedge funds and other major investors spent more than $330m on the US midterm elections, according to the FT.
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