AI Sell-Off Batters Hedge Funds, Massive Losses Trigger Layoffs and Strategic Pullbacks

TechFlow, November 6 -- The sharp market downturn in October severely impacted hedge funds, forcing them to unwind positions at the fastest pace in years and manage risk through layoffs and reductions in investment strategies. Before Thursday's equity sell-off escalated further, many funds had already incurred substantial losses, with a wide range of investment strategies—from AI and healthcare equities to high-risk corporate bonds—all coming under pressure.

According to Morgan Stanley data, select-stock hedge funds executed their largest active position reduction in over a decade in October, with market exposure declining by approximately 9% since June. By the end of October, more than 40% of funds saw year-to-date returns flatten or turn negative. Goldman Sachs reported that hedge funds concentrated in telecommunications, media, and technology sectors fell over 4% on Thursday, while multi-strategy funds dropped 1.4%. Multiple firms have already begun adjusting their operations.

Samlyn Capital, managing approximately $7 billion, scaled back its investment scope to focus on financial services stocks, leading to the departure of several industry executives and investment professionals; Engineers Gate substantially downsized its combined quantitative and discretionary strategy team; and Walleye Capital likewise laid off multiple portfolio managers. Lone Pine Capital posted an 8.8% loss in October alone, while Arini Capital significantly trimmed its bond positions. (Jin10)