LONDON: Hedge fund stock pickers and multi-strategy funds gave up around half their average yearly gains last Thursday’s tech-driven equity sell-off, a note by Goldman Sachs shows.
Wall Street shares were hit last week by a darkening US economic outlook uncertainty over president Donald Trump’s tariff policies, with the Nasdaq last 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 going into last week, said a separate note from JPMorgan last Wednesday.
A long position expects an asset value to rise whereas a short bet hopes it will decline.
Technology is the second worst-performing S&P 500 sector year-to-date with about an 8% loss, after consumer discretionary 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 last Thursday and seen by Reuters last Friday.
US stock pickers finished down 1.4% last Thursday, taking their yearly performance to negative 0.5% for this year 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 Jan 27, 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.
February saw some of the biggest of these funds produce mixed returns so far this year, with Millennium Management down 1.3% in February taking their returns on the year so far to a negative 0.8%, said sources with knowledge of the matter.
Bloomberg first reported the results.
D.E. Shaw’s Oculus Fund returned a negative 4.3% taking their year to a negative 2.8% so far, a source said. D.E. Shaw declined to comment.
Macro funds fared better.
Hedge fund Rokos Capital Management’s return on investment was down 0.29% during February to Feb 21, but was up 0.57% for this year so far, said the source. Rokos declined to comment.
British financier Andrew Law’s secretive macro fund Caxton returned 4% in February adding gains to a positive year so far, up 7%, said another source with knowledge of the matter last Friday. — Reuters
