Key facts
- Goldman Sachs estimates tech-focused equity long-short funds fell more than 4% on Thursday, November 5, leaving 2026 returns roughly flat.
- Goldman Sachs put the June peak gain for those tech-focused funds at 24% before the AI-driven selloff.
- Walleye Capital, a $17 billion multi-strategy fund, said it would return a portion of capital to investors.
- Walleye's investor letter, seen by Reuters, cited its worst month since March 2020.
- Market participants said several large multi-manager platforms cut leverage and laid off loss-making teams in recent weeks.
- PivotalPath said it observed a high and increasing overlap among the 10 largest multi-strategy hedge funds.
A global equity selloff led by technology stocks erased year-to-date gains at many hedge funds and pushed some managers to cut risk and shrink investment teams, according to a Reuters report published November 6, 2026.
Equity long-short funds that primarily invest in tech fell more than 4% on Thursday, November 5, leaving their 2026 returns roughly flat, Goldman Sachs estimates showed. That compares with a peak gain of 24% in June before the AI-driven selloff. Global fundamental long-short managers were down 1.3% on average and multi-strategy managers dropped 1.4% on Thursday, according to the bank.
Walleye Capital, a $17 billion New York-based multi-strategy fund, said in an investor letter on Thursday seen by Reuters that it would trim its internal equity long-short business and reduce a substantial portion of its equity investment team. "Following our worst month since March 2020, in an already challenging 2026, we have taken a hard look at every aspect of our firm," the letter said. "We have evaluated the optimal size of the Fund and plan to return a portion of our capital."
Market participants said several large multi-manager hedge fund platforms have cut leverage and laid off loss-making teams in recent weeks, and expect more layoffs if declines continue.
The turmoil followed a bruising October, when sentiment was dampened by elevated AI-related borrowing costs and worries over returns. The Nasdaq 100 fell 6.6% last month, its biggest monthly fall in 18 months, and JPMorgan estimated global hedge funds lost 3% in October.
John Flood, a partner and managing director in Goldman Sachs' global banking and markets division, said in a note on Thursday that heavy de-risking ahead of the US midterms left many hedge funds chasing Wednesday's relief rally, only to be caught wrong-footed a day later. "Hedge funds are selling back pockets of the market (hyperscalers)" that they had just bought, he said.
Research firm PivotalPath warned in a note that week that it observed a high and increasing degree of overlap among the 10 largest multi-strategy hedge funds, meaning their unwind could fall on many of the same securities.