HEDGE fund stock pickers and multi-strategy funds gave up around half their average yearly gains in Thursday’s (Mar 6) tech-driven equity sell-off, a note by Goldman Sachs showed.
Wall Street shares have been hit this week by a darkening US economic outlook and uncertainty over President Donald Trump’s tariff policies, with the Nasdaq on Thursday confirming a correction since peaking in December.
Stock plunges were felt acutely in parts of the markets where hedge funds held long bets, such as in technology, media and telecommunications companies.
Global hedge funds were mostly long these stocks coming into this week, said a separate note from JPMorgan on Wednesday. A long position expects an asset value to rise whereas a short bet hopes it will decline.
Technology is the second worst-performing S&P 500 sector year-to-date with about an 8 per cent loss, after consumer discretionary stocks, which have tumbled just over 9 per cent.
Hedge funds were caught in crowded trades that sold off, leaving those which pick stocks with a 1 per cent average return on the year so far, said the Goldman Sachs note.
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US stock pickers finished down 1.4 per cent on Thursday, taking their yearly performance to -0.5 per cent for 2025, so far, the note said.
Hedge funds that employ different kinds of trading strategies also had “a challenging day”, said Goldman. This kind of hedge fund, which for the last three years has consistently produced positive returns, has this year lost money 18 out of 29 days since Jan 27.
This negative investment streak was one of the worst performances for this kind of hedge fund that the bank had ever seen, said Goldman.
Multi-strategy hedge funds are designed to offset the losses of one strategy with another. February saw some of the biggest of these funds produce mixed returns so far this year, with Millennium Management down 1.3 per cent in February, taking their returns on the year so far to -0.8 per cent, said sources.
DE Shaw’s Oculus Fund returned -4.3 per cent, taking their year to -2.8 per cent so far, a source said. DE Shaw declined to comment.
Macro funds fared better. Hedge fund Rokos Capital Management’s return on investment was down 0.29 per cent from Feb 1-21 but was up 0.57 per cent for 2025 so far, said the source. Rokos declined to comment.
British financier Andrew Law’s secretive macro fund Caxton returned 4 per cent in February, adding gains to a positive year so far, up 7 per cent, said a source on Friday. Caxton did not immediately respond to several requests for comment. REUTERS
