Hedge funds dumped global technology stocks during the first week of November at nearly the worst weekly pace in Goldman Sachs data going back to 2016, slashing total equity exposure by 8.7 percentage points in the steepest one-week retreat since the March 2020 crash. The six-week selling streak in global AI stocks reached the highest 20-day volume on record and triggered the biggest momentum crash in about 40 years, leaving Goldman’s High Beta Momentum index down 51%, its worst drop in 15 years of data.
The wave of selling capped the deepest risk retreat by global equity hedge funds in more than a decade, with long-short funds cutting gross market value by 10.7% from late June through the first week of November, Morgan Stanley prime brokers wrote on Nov 10. Hedge funds cut AI exposure to 32% from 47% in June, moving underweight the sector relative to market capitalization weights for the first time since early 2023. The unwind accelerated on Nov 5 as the S&P 500 fell 4.36% and erased about $3 trillion after the US midterm elections, driving US long-short net leverage down 5 percentage points in a single session to 42% while leveraged ETFs sold $57 billion of US equities.
The rout hammered hedge fund returns and prompted broader defensive positioning across equity markets, lifting consumer staples, healthcare and utilities stocks. Technology hedge funds lost more than 4% in the Nov 5 session alone, wiping out year-to-date gains that had reached 24% before the summer, while Chris Rokos’s macro hedge fund lost 4.9% in October. Those setbacks followed steep October losses across the industry, including a 33% drop at VARA, a 32% year-to-date decline at Arini’s main credit fund, and equity team cuts at Engineers Gate, Samlyn Capital and Walleye.
