AI Sell-Off Hits Hedge Funds Hard; Massive Losses Trigger Layoffs and Strategy Reductions

TechFlow reported on November 6 that October's market plunge hit hedge funds hard, forcing them to unwind positions at the fastest pace in years and cut risk through layoffs and strategy reductions. Before Thursday's stock sell-off intensified, many funds had already suffered massive losses, with funds across strategies—from AI and healthcare stocks to high-yield corporate bonds—taking a hit.

Morgan Stanley data showed that stock-picking hedge funds made their largest deliberate unwinds in more than a decade in October, reducing market exposure by about 9% since June; as of the end of October, more than 40% of funds were flat or negative year to date. Goldman Sachs said hedge funds focused on telecom, media and technology fell more than 4% on Thursday, while multi-strategy funds declined 1.4%. Several firms have begun adjusting their businesses.

Samlyn Capital, which manages about $7 billion, narrowed its investment scope to focus on financial services stocks, leading to departures of several sector heads and investment staff; Engineers Gate sharply cut its quant and discretionary strategy team; Walleye Capital also let go of multiple portfolio managers. Lone Pine Capital lost 8.8% in October alone, while Arini Capital significantly reduced its bond holdings. (Jin10)

Source: TechFlow