Hedge funds experienced their worst performance since August on October 15, marking the third time this year that broad strategies dropped by more than 0.8%. Global stock pickers lost 0.9%, while tech-focused funds fell 2.0%. Systematic long-short and multi-strategy funds each declined by approximately 1%.
The sell-off was driven by unexpected US inflation data, which raised concerns about sustained high borrowing costs for capital-intensive AI infrastructure. Between October 8 and October 14, hedge funds became net sellers of global AI equities, reversing positions accumulated since 2025.
Individual AI-linked stocks saw significant declines, with CoreWeave dropping 15.5% and Oracle falling 8.8%. On October 14, the Nasdaq Composite decreased by 1.9% and the S&P 500 by 1.1%.
Asian markets faced severe pressure, particularly in the semiconductor sector. The South Korean KOSPI index plunged 8%, and Taiwan recorded a foreign capital outflow of $9.3 billion. Asia-focused managers lost 6.8% in the first half of October, erasing over half of their gains since late June 2026.
Hedge fund net leverage has reached historically low levels across various strategies. While some forced selling may have concluded, quant funds may continue to reduce positions in response to rising market volatility.
