Analysis
Stock-Picking Hedge Funds Lost Money Every Day Last Week, 2.9% in Total, and Asia Managers Lost the Most
Goldman Sachs' prime brokerage desk told clients that global fundamental long-short funds lost 2.9% in the week to October 15, with losses on all five days, according to Reuters. Asia-focused stock pickers fell 2.6% on Thursday alone and are down 6.8% for the first half of October.
The AI unwind of the past week was felt most where the AI trade was most concentrated: in hedge fund portfolios. Reuters reported on October 16, citing a Goldman Sachs prime brokerage note, that global fundamental long-short funds, the stock pickers, lost money on every day of the week to October 15 and were down 2.9% for the period. They remain up 14.3% for the year, which gives a sense of how much of the year's gain came from the positions that were being sold.
Thursday, October 15, was the worst day. Stock pickers globally lost 0.9%; funds focused on Asia lost 2.6%; technology-focused funds 2.0%; and systematic long-short and multi-strategy funds, which are supposed to be uncorrelated with the stock pickers, fell about 1%. Goldman noted that between the pandemic and the end of 2025 the three broad strategies had never all fallen more than 80 basis points on the same day. It has now happened three times in 2026: on February 4, July 28 and October 15.
Asia is where the damage is largest because Asia is where the gains were. Funds focused on the region were up more than 40% for the year in late June, on Korean and Taiwanese chip stocks; they have lost 6.8% in the first half of October and given back more than half of that lead. The Kospi fell 7.6% on Thursday to a six-month low and tripped a circuit breaker, Taiwan lost more than 3%, and the iShares MSCI South Korea ETF (EWY) finished the week down 15.12%. Long-short managers have been net sellers of AI stocks globally for six straight sessions, and Thursday's reduction in gross exposure was about half of Wednesday's, which is how an unwind slows down rather than how it ends.
Bruno Schneller of Erlen Capital Management put it to Reuters as "less a fundamental rejection of AI and more a classic, high-velocity unwind of a crowded trade meeting a macro reality check". The macro reality was a 3.7% CPI print, a 1.3% monthly jump in producer prices and oil back above $100, each of which raised the cost of money for companies whose business plan is to borrow it. CoreWeave's bond yields rose above 15%, its shares lost 25% on the week, and the stocks held by the most funds fell by the most.
The lesson is the one the Goldman desk has been writing about since February: when hedge funds, retail investors and index funds are long the same twenty stocks, the exit is the same door, and the funds, which are leveraged and mark to market daily, reach it first. The Nasdaq's 4.48% weekly fall was its worst since June. Whether this week brings the second half of the unwind or its end depends less on Meta's and Tesla's numbers on Wednesday than on who still has to sell before they are published.