Key moments
- Stock-picking hedge funds have averaged a mere 1% return this year following recent market sell-offs.
- The technology, media, and telecommunications sectors, where hedge funds held significant long positions, experienced the most acute declines.
- Multi-strategy hedge funds, despite consistent past performance, have incurred losses on 18 out of 29 trading days since January 27.
Hedge Funds Face Significant Losses, Goldman Sachs Warns
Recent market turbulence has significantly impacted hedge fund performance, with substantial losses recorded across various investment strategies, according to a recent Goldman Sachs note. Yesterday’s tech-driven equity sell-off resulted in hedge funds relinquishing approximately 50% of their average year-to-date gains. The downturn was particularly pronounced in sectors heavily favored by hedge funds, notably technology, media, and telecommunications, where long positions were prevalent. Stock plunges were felt acutely in these areas, as these sectors saw notable declines due to hedge fund long bets.
The widespread nature of these losses highlights the challenges posed by the current market environment. Stock-picking hedge funds, which had maintained a modest average return, saw their gains eroded by the sudden sell-off. They have averaged a mere 1% return this year after the most recent slew of sell-offs. U.S. stock pickers finished down 1.4% on Thursday, taking their yearly performance to a negative 0.5% for 2025. This rapid shift underscores the volatile nature of current market conditions, where even seasoned investors are facing significant headwinds.
Additionally, multi-strategy hedge funds, designed to mitigate risk through diversified strategies, also experienced considerable losses. This negative investment streak, characterized by losses on 18 out of 29 trading days since January 27, represents a severe downturn. According to Goldman Sachs, this negative investment streak was one of the worst performances for this kind of hedge fund that the bank had ever seen.
The technology sector, in particular, has been a significant drag on performance, ranking among the worst-performing sectors within the S&P 500 year-to-date, with an approximate 8% loss. Economic uncertainties, including a darkening U.S. economic outlook, and trade policy concerns have had a pronounced negative impact on the market. Hedge funds caught in crowded trades, where many held similar long positions, were particularly affected by the rapid sell-off.
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