LONDON, Oct 26 (Reuters) - Trend-following hedge funds witnessed their worst weekly performance in two years last week, as concern about the eventual pay-off from hefty AI spending ignited volatility across stocks and bonds, a Goldman Sachs note seen by Reuters on Monday showed.
The Nasdaq 100, home to the world's largest tech stocks, fell 5.5% last week, its biggest weekly fall since April 2025, when US President Donald Trump's Liberation Day tariffs roiled world markets.
Last week's stock market fall was led in part by a 10% weekly slide in shares of Meta, which reported strong earnings, but indicated it would need to raise more capital for its AI investments, which sent shivers through markets.
Bond markets were also volatile, as investors sought out the relative safety of US Treasuries, while selling the debt of more fragile economies, such as France.
Here's what the note said:
• Systematic long-short hedge funds, whose algorithms ride market trends until they peter out, suffered their worst week since 2024, with a 2% decline, while fundamental long/short strategies drew down another 1.1%.
• Fundamental long short strategies are down 3.8% for the month so far, but still up 8.8% this year, while systematic strategies are down 1.1% so far in October, but up 18.7% so far this year.
• Single stocks collectively saw the largest de-gross activity - a general pulling back in positions - since late July, while US equities have been net sold for the third straight week, and in four out of the last five weeks, the note said
• Goldman said its prime brokerage desk reported $20 billion in selling of tech stocks over the last two weeks, close to July's major unwind in which saw $23 billion in selling.
(Reporting by Amanda Cooper; Editing by Dhara Ranasinghe)