Hedge fund stock pickers and multi-strategy funds gave up around half their average yearly gains in Thursday's tech-driven equity selloff, a note by Goldman Sachs showed (GS.N).
Wall Street shares have been hit this week by a darkening U.S. economic outlook uncertainty over President Donald Trump's tariff policies, with the Nasdaq (.IXIC) on Thursday confirming a correction since peaking in December.
Stock plunges were felt acutely in the parts of the markets where hedge funds held long bets such as on technology, media and telecommunications companies.
Global hedge funds were mostly long these stocks coming into this week, said a separate note from JPMorgan on Wednesday. A long position expects an asset value to rise whereas a short bet hopes it will decline.
Technology (.SPLRCT) is the second worst-performing S&P 500 (.SPX) sector year-to-date with about an 8% loss, after consumer discretionary (.SPLRCD) stocks which have tumbled just over 9%.
Hedge funds were caught in crowded trades that sold off leaving those which pick stocks with a 1% average return on the year so far, said the Goldman Sachs note sent to clients on Thursday and seen by Reuters on Friday.
U.S. stock pickers finished down 1.4% on Thursday, taking their yearly performance to negative 0.5% for 2025, so far, the note said.
Hedge funds that employ different kinds of trading strategies also had "a challenging day," said the Goldman note.
This kind of hedge fund which for the last three years has produced consistently positive returns has this year lost money 18 out of 29 days since January 27th, said Goldman.
This negative investment streak was one of the worst performances for this kind of hedge fund that the bank had ever seen, said Goldman.
Multi-strategy hedge funds are designed to offset the losses of one strategy with another.
