Hedge fund stock pickers and multi-strategy funds saw a significant drop in their average yearly gains during Thursday's tech-led equity selloff, according to a note from Goldman Sachs.
The recent market turbulence, fueled by concerns over the U.S. economic outlook and President Donald Trump's tariff policies, has particularly impacted Wall Street shares, with the Nasdaq officially entering a correction phase since its peak in December.
The sharp declines in stock prices were particularly pronounced in sectors where hedge funds had substantial long positions, such as technology, media, and telecommunications companies.
Global hedge funds were predominantly bullish on these stocks as of this week, as outlined in a report from JPMorgan. Long positions anticipate asset value appreciation, while short bets rely on value depreciation.
Notably, the technology sector ranks as the second-worst-performing S&P 500 sector year-to-date, registering an approximately 8% loss, trailing behind consumer discretionary stocks, which have dropped just over 9%.
Hedge funds found themselves entangled in crowded trades that experienced significant sell-offs. As a result, stock pickers recorded only a 1% average return thus far this year, as detailed in the Goldman Sachs note circulated to clients.
On Thursday, U.S. stock pickers closed with a 1.4% loss, leading to a year-to-date performance of -0.5% for 2025. The same note highlighted that hedge funds utilizing diverse trading strategies also faced challenges during the tumultuous market conditions.
Among them, one particular hedge fund, known for its consistent positive returns over the past three years, suffered losses on 18 out of 29 trading days since January 27, marking one of the bank's worst-performing instances for this fund type.
Multi-strategy hedge funds, designed to mitigate losses in one area with gains in another, witnessed mixed results in February. For example, Millennium Management saw a 1.3% drop in February, translating to a -0.8% return for the year so far, according to sources familiar with the matter.
Similarly, D.E. Shaw's Oculus Fund reported a 4.3% decline for February, accumulating a -2.8% return year-to-date, while Rokos Capital Management posted more stable performance with a 0.29% decrease in February and a 0.57% gain for 2025, as reported by sources.
On the positive side, Andrew Law's macro fund, Caxton, marked a 4% return in February, extending its gains to 7% for the year, according to another source. Unfortunately, Caxton did not respond to requests for comment.