Hedge fund technology sector sell-off and restructuring

In mid-October, global hedge funds using Goldman Sachs prime brokerage services executed the largest percentage reduction in technology holdings since 2016. This period was characterized by aggressive profit-taking, particularly in semiconductor stocks, which contributed to a 5.5% decline in the Nasdaq 100. During this time, the aggregate net leverage ratio among surveyed funds reached a one-year low of 48.6%.

By early November, reports indicated that major hedge funds faced widespread losses for the month of October. This downturn was driven by the technology sell-off, rising bond market volatility, and geopolitical uncertainty. Approximately $20 billion in technology and AI-related equities were sold over a two-week period, with short bets approaching five-year highs.

Following these losses, several firms have initiated restructuring and staff reductions. Walleye Capital, which manages approximately $17 billion in assets, reported a 5.9% loss in October, marking its worst monthly performance since March 2020. In response, the firm is restructuring its internal equity long/short business, which includes the departure of division head Anil Gondi and a substantial reduction of the internal investment team. CEO and CIO Will England stated that previous investments in internal stock-picking capabilities did not yield expected results relative to the resources consumed.

Engineers Gate also reported a loss of 5.5% as of late October, leading the firm to dissolve most of its Synthesis equity team. Other major multi-strategy platforms, including Millennium, Marshall Wace, ExodusPoint, and North Rock Capital, also recorded monthly losses.