Global hedge funds suffered steep losses in October as artificial intelligence trades were unwound amid rising inflation and expectations of tighter monetary policy. Asia‑focused managers were hit hardest, with stock pickers losing 6.8% in the first half of the month, erasing much of their earlier gains.
Goldman Sachs data showed global fundamental long‑short funds fell 2.9% through October 15, though they remain up 14.3% for the year. Technology‑focused funds declined 2%, while systematic long‑short and multi‑strategy funds lost about 1% each, reflecting broad weakness across strategies.
The selloff was triggered by stronger than expected United States inflation data, which raised fears of further interest rate hikes. Semiconductor‑heavy markets bore the brunt, with South Korea’s KOSPI tumbling 8% to a six‑month low and Taiwan’s benchmark losing more than 3%. Hedge funds recorded losses on every trading day through October 15, highlighting the severity of the retreat.
Investor sentiment has weakened as doubts grow over whether massive investments in artificial intelligence infrastructure can deliver quick returns. Elevated borrowing costs have further pressured leveraged positions, forcing prime brokerages to execute risk mitigation calls. The unwinding of crowded artificial intelligence trades dismantled one of the year’s most profitable momentum strategies, leaving Asia‑focused managers particularly vulnerable.
