Systematic Hedge Funds Fall 2% in Worst Week Since 2024
Key Facts
Long-short systematic hedge funds recorded their worst week since 2024, falling 2%, according to data cited by Reuters from Goldman Sachs. Fundamental long-short strategies fell 1.1% over the same week. The pressure came as the Nasdaq 100, which includes the world’s largest technology companies, fell 5.5% for the week, its biggest weekly decline since April 2025. Reuters’ coverage attributed the turmoil in stocks and bonds to investor concerns about the ultimate return on heavy spending on artificial intelligence. It said investors moved into U.S. Treasuries and sold debt from more vulnerable economies such as France.
Meta shares were among the factors weighing on the market, falling 10% for the week despite the company reporting strong results. The company said it needed to raise more capital to fund its AI investments, keeping the question of how to finance expansion in the sector in investors’ focus. On October 22, the S&P 500 fell 1.2% and the Nasdaq Composite dropped 2.6%. AI stocks were hit in that session by concerns about the cost of borrowing needed to build data centers and buy AI chips. Meta also fell 7% in the session, after announcing a new class of shares to raise money for AI investments and other expenses.
Pressure also spread to fund positions, with single stocks collectively seeing the biggest reduction in positions since late July. Funds were net sellers of U.S. equities for the third consecutive week and in four of the past five weeks, according to a Goldman Sachs note cited by Reuters. The bank’s prime brokerage desk said it recorded $20 billion in technology stock sales during the two weeks preceding the report. Those sales approached the major wave of selling in July, when they reached $23 billion. The figures show position reductions coinciding with a decline in technology shares, as concerns widened over financing AI-related investments.
The weekly losses did not erase the strategies’ gains since the start of the year. Fundamental long-short strategies fell 3.8% in October through October 26, but remained up 8.8% since the start of 2026. Systematic strategies fell 1.1% during the month through the same date, while their year-to-date gains remained at 18.7%. In September, fundamental long-short global equity funds lost an average of 0.55%, while the MSCI World Index fell 1.3%. By contrast, computer-driven systematic funds rose 3.46% in September, their best monthly performance of the year up to that point.
Hedge funds had cut their technology stock positions at the fastest pace in at least a decade over the five trading sessions through October 15, according to Goldman Sachs. As of October 20, their net allocation to the sector stood at 23.5% of the global prime brokerage book, at the 90th percentile compared with the previous five years. Net leverage fell to a one-year low of 48.6%. On October 22, each of the three main strategies tracked by Goldman lost more than 1%, marking the first decline of that size since the COVID pandemic. The strategies include fundamental long-short, systematic and multi-strategy.
Attention is turning to a week Reuters described as pivotal for U.S. equity investors, as earnings reports from major companies tied to AI coincide with a Federal Reserve meeting. That timing puts market momentum, which coverage described as shaky, to a dual test from corporate results and the monetary policy decision. The yield on the 10-year U.S. Treasury note had fallen to 4.97% on October 22, from 5.13% at Wednesday’s close the previous week. The decline in yields came as investors sought government bonds as a safer haven. In this context, concerns over returns on AI spending intersect with volatility in stocks and bonds and funds’ reduction of positions.