Hedge funds log widest daily drawdown since Covid in stock rout

GLOBAL hedge funds suffered one of their broadest declines since the Covid-19 pandemic following the stock market sell-off on Thursday (Oct 22), said Goldman Sachs’ prime brokerage desk.

“For the first time since Covid-19, all three broad equity strategies fell more than 1 per cent on the same day,” it said in a note to clients.

Global fundamental long/short managers were down 1.4 per cent at the market close on Thursday, their worst day since Jul 16, with telecommunications, media and technology-focused funds falling by an average of 2.7 per cent, according to the note.

Global systematic long/short managers were hit by their third-worst day since December 2023, dropping 1.3 per cent.

Even multi-strategy platforms – the pod shops with a broad mix of portfolio managers designed to protect against firm-wide drawdowns – slid 1.9 per cent for their second-worst day since the April 2025 tariff sell-off.

Tech stocks in the US were sold heavily on Thursday on mounting concerns over whether massive spending on artificial intelligence will bear fruit.

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The Nasdaq 100 Index slid 2.9 per cent, the most since June, as fears over oil-induced inflation added to the woes. Even bearish positions are not necessarily paying off in a volatile earnings season.

“Based on estimates from our prime book, more than two-thirds of hedge funds finished down on the day, as concentrated shorts were squeezed further in the second half of the session,” the prime brokerage said.

Asia fundamental long/short managers also lost money, with month-to-date declines at 9.3 per cent. Even so, their hedge fund returns remain broadly positive so far this year at 14.2 per cent, going by the note. BLOOMBERG