Hedge funds slash positions and staff as October selloff deepens

what happened

The Wall Street Journal reports that an October market rout hit hedge funds hard. They were forced to unwind positions at the fastest pace in years and cut staff, and many firms were already nursing deep losses before stocks slid further on Thursday.

Samlyn Capital, which manages around $7 billion, is narrowing its focus to financial-services stocks, and several sector heads and investment staff have left. Its fund lost about 5% this year through October. Engineers Gate, a roughly $4 billion firm, is shutting most of its quantamental strategy and cutting all but five of its portfolio managers.

Morgan Stanley estimates October brought the largest active unwinding of stock-picking fund positions in more than a decade, and more than 40% of those funds were flat or negative for the year through October. Goldman Sachs says telecom, media and technology funds lost more than 4% on Thursday, nearly erasing their gains for the year.

why it matters

The S&P 500 and Nasdaq remain positive for the year, but forced deleveraging and selling of tech positions keep pressure on crowded trades. Investors are moving into US Treasurys and defensive stocks, which matters for both equities and government bonds.

market impact

US tech stocks: forced hedge fund selling pressures the sector; Treasurys gain as investors rotate to safety

• ▼US tech stocks pressure down — hedge funds are cutting risk positions and leverage after the AI stock reversal
• ▲US Treasurys pressure up — investors are rotating out of riskier assets into safer ones

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