Goldman Sachs reported that hedge funds faced a historic decline in performance, with their Hedge Fund VIP list suffering its worst one-month underperformance against the S&P 500 in more than 20 years. This downturn coincided with a notable de-grossing episode, where funds reduced their positions in various AI stocks, particularly in the semiconductor sector and among major tech companies.
After entering the previous quarter heavily invested in AI, hedge funds are now diversifying their portfolios, despite having recorded strong gains in the second quarter driven by AI stocks. The report highlights that while hedge fund leverage and AI exposure have decreased from their peaks in Q2, they remain above long-term averages.
Despite the recent volatility, US equity long/short hedge funds have achieved a return of 10% through mid-August