Global hedge funds extend losses as AI trade unwind hits Asia-focused managers

Traders Union
All News
Stocks
Hedge funds hit by AI unwind

Highlights

Global fundamental long-short hedge funds lose 2.9% for the week to October 15, with daily losses reported each day, according to Goldman Sachs.
Asia-focused managers drop 2.6% Wednesday, and have lost 6.8% in the first half of October, erasing more than half their gains since late June.
South Korea's KOSPI falls 8% to a six-month closing low and Taiwan stocks drop over 3% as semiconductor and AI-related shares lead regional declines.

Goldman note details broad hedge fund retreat

As reported by Reuters, citing Goldman Sachs, global fundamental long-short funds lose money every day this week, with losses reaching 2.9% for the week to October 15.

Goldman says hedge funds across strategies retreat sharply on Wednesday, with global stock pickers down 0.9%. Within that group, Asia-focused managers fall 2.6%, while technology-focused funds decline 2.0%. Global systematic long-short managers and multi-strategy funds also drop about 1%.

The bank says that from the COVID period through the end of 2025, its three broad hedge fund strategy groups never fell more than 80 basis points on the same day. It adds that such a move now occurs three times this year, on February 4, July 28 and October 15.

Despite the latest selloff, global fundamental long-short funds remain up 14.3% for the year to date.

Asia markets bear the brunt of AI selloff

Investors are increasingly questioning whether heavy AI spending can deliver returns soon, especially as elevated inflation keeps borrowing costs high. Hotter-than-expected U.S. inflation data this week also lifts expectations for further rate hikes, fuelling the selloff in semiconductor and AI supply chain shares.

Semiconductor-heavy markets absorb the biggest shock. South Korea's benchmark KOSPI tumbles 8% to a six-month closing low on Thursday, while Taiwan stocks also lose more than 3%.

According to Goldman Sachs, Asia-focused stock pickers lose 6.8% in the first half of this month and erase more than half the gains from their late-June peak, when they are up more than 40% for the year.

In our earlier coverage of the AI-linked tech stock selloff, we explained how hotter-than-expected inflation data reignited fears of further Federal Reserve rate hikes and pushed Nasdaq-linked futures and major tech names lower. We also noted that investors were reassessing the cost of funding large-scale AI infrastructure as higher borrowing costs weighed on sentiment across AI and chip-related stocks.

This material may contain third-party opinions, none of the data and information on this webpage constitutes investment advice according to our Disclaimer. While we adhere to strict Editorial Integrity, this post may contain references to products from our partners.