Key facts
- Global hedge funds lost nearly 3% of their year-to-date gains in July.
- The losses were primarily driven by the unwinding of technology-related trades.
- Market volatility was exacerbated by rising crude oil prices and a sell-off in chip stocks.
- Multi-strategy funds were more resilient than other strategies, while Asia-Pacific equity long-short managers saw the steepest declines.
- Despite July's performance, the industry remains up approximately 8% for the year.
Global hedge funds saw their year-to-date gains dented in July, surrendering nearly three percentage points of performance due to the unwinding of technology-related trades, according to JPMorgan analysis. The market turbulence, exacerbated by rising crude oil prices and a sell-off in semiconductor stocks, triggered losses across various strategies.
JPMorgan noted that many funds struggled to exit crowded technology positions before prices fell, amplifying losses. While multi-strategy funds showed resilience with an average loss of 2.2%, Asia-Pacific equity long-short managers experienced the steepest declines, averaging 9.4% losses. Quantitative equity hedge funds also struggled, posting around 5% losses, with leverage remaining near five-year highs.
Momentum strategies were identified as a significant contributor to July's losses, as investors were heavily positioned in technology shares. Despite the recent correction, hedge fund exposure to the technology sector remains elevated over the longer term.