HedgeCo.Net (Palm Beach Gardens, FL)
Hedge funds are reeling after a tech-driven market selloff erased nearly half their 2025 gains in a single day, according to a Goldman Sachs note that’s making the rounds among prime brokerage clients. Thursday’s bloodbath—sparked by a darkening U.S. economic outlook and uncertainty over President Trump’s tariff agenda—hit stock-picking and multi-strategy funds hardest, exposing crowded trades and testing the mettle of even the savviest managers.
Goldman’s data paints a grim picture: U.S. stock pickers ended Thursday down 1.4%, dragging their year-to-date performance into the red at -0.5%. Globally, equity long/short funds are clinging to a measly 1% average return for 2025 so far, a far cry from the double-digit hauls of recent years. Multi-strategy outfits, typically a bastion of resilience, weren’t spared either. After three years of consistent gains, these funds have posted losses on 18 of the 29 trading days since January 27—one of the worst streaks Goldman’s tracked in its history.
The culprit? A tech, media, and telecom (TMT) meltdown that caught funds flat-footed. “Global hedge funds were overweight TMT coming into this week,” a JPMorgan note confirmed earlier, and the Nasdaq’s 10% correction from its December peak proved a brutal wake-up call. Portfolio managers who’d piled into long positions in these sectors watched their bets unravel as Wall Street’s risk-off mood deepened.
It’s not just the stock pickers feeling the heat. Multi-strategy funds, designed to balance losses across tactics, struggled to offset the equity carnage. “This was a challenging day across the board,” Goldman understated, noting that even diversified playbooks couldn’t dodge the market’s wrath. Sources whisper that some high-profile names are quietly trimming leverage to avoid further bleed.
Yet amid the gloom, macro funds are holding their own. Rokos Capital Management, for instance, was down just 0.29% through February 21 and remains up 0.57% year-to-date, per an insider. Meanwhile, Andrew Law’s elusive Caxton fund notched a 4% gain in February, pushing its 2025 return to 7%. “Macro’s where the edge is right now,” one allocator told HedgeCo.Net. “Equities are a minefield, but rates and FX are giving nimble players room to maneuver.”
The broader market context is ugly. Trump’s tariff threats have spooked investors, and with the Fed signaling no rush to cut rates, the Nasdaq’s tumble reflects a broader repricing of risk. Hedge funds, long accustomed to riding tech’s coattails, now face a reckoning. “Crowded trades got torched,” says HFR’s Sarah Kline. “The question is who pivots fastest.”
For the sharp-eyed, there’s opportunity in the wreckage. Distressed debt desks are buzzing, and some managers are already rotating into defensive sectors like utilities and healthcare. Others are eyeing short books—Goldman hints at funds doubling down on bearish bets as volatility spikes. But with U.S. economic data due next week, the path ahead looks treacherous.
Hedge funds thrive on chaos, but this rout’s a gut check. Halfway through Q1, the industry’s licking its wounds—and the clock’s ticking to claw back those losses. Stay tuned.
