AI sell-off hits hedge funds, Asia managers suffer losses

Global fundamental long-short equity funds lost money on every trading day of the week through Oct. 15, according to Goldman Sachs prime brokerage data. The strategy remains up 14.3% for the year.

On Wednesday, global fundamental long-short funds fell 0.9%. Asia-focused funds dropped 2.6%, while technology-focused managers lost 2%. Global systematic long-short and multi-strategy funds each declined about 1% that day.

The losses followed concerns that large investments in AI infrastructure may not generate returns sufficient to support current valuations. Higher-than-expected U.S. inflation data also increased expectations that interest rates could stay higher or rise further.

Semiconductor companies and other businesses linked to the AI supply chain were among the stocks hit hardest. South Korea’s KOSPI index fell 8% on Thursday, Oct. 15, to its lowest level in six months. Taiwan’s stock market declined more than 3%.

Goldman Sachs described the simultaneous declines across major hedge fund strategies as unusual. “From COVID through end-2025, all three broad strategies never fell more than 80bps on the same day,” the bank wrote. Comparable declines occurred three times in 2026: on Feb. 4, July 28 and Oct. 15.

Asia-focused fundamental long-short managers lost 6.8% in the first half of October. The decline erased more than half of their gains through late June, when their year-to-date returns exceeded 40%.