Tech rout trims hedge funds; industry still up 8% YTD

Global hedge funds lost almost three percentage points of performance in July after a sharp reversal in technology stocks, while the industry remains roughly 8% higher year-to-date through July 2026, according to analysis by JPMorgan and commentary from Goldman Sachs.

JPMorgan’s analysis attributed the July volatility to the unwinding of crowded technology trades as investors moved to reduce exposure following heavy losses in AI-related names. The firm linked the sell-off to higher oil prices associated with the Iran conflict, which weighed on global equities and triggered a pronounced correction in semiconductor shares, especially across Asia.

Many funds were unable to exit large, concentrated technology positions before prices fell, amplifying losses during the sector decline. Momentum strategies were identified as a major source of July losses because several momentum managers remained heavily positioned in technology after the sector’s strong gains earlier in 2026.

Performance varied by strategy. Multi-strategy hedge funds recorded an average decline of 2.2% in July. Asia-Pacific equity long-short managers posted the steepest losses, with average declines of 9.4% as regional technology and semiconductor stocks underperformed. Quantitative equity hedge funds saw average declines near 5%, with JPMorgan estimating average leverage for quantitative managers at about 450%.

Overall leverage across the hedge fund industry finished July broadly unchanged from the start of the month, though analysis showed leverage swung significantly during the period and remained close to five-year highs while staying below the peaks observed over the past 12 months. The report highlighted a marked reduction in gross equity exposure in July, consistent with a seasonal pattern in which managers trim holdings midyear and then rebuild later. JPMorgan noted this year’s reduction in gross exposure was the largest since 2022 and the second-largest since 2018, with only 2020 showing a larger cut.

Goldman Sachs described July as the second-worst month for global equity long-short hedge funds over the past four years and said Asia-focused stock-pickers experienced their weakest month on record.

Despite the near-term correction, hedge fund exposure to the technology sector remains elevated on a longer-term basis, with position sizes still relatively large, JPMorgan’s analysis showed.

Year-to-date performance for the hedge fund industry stands at about an 8% gain through July 2026.