According to Goldman, hedge funds suffered historic underperformance against the S&P 500 in July, marking the worst results in over 20 years:
- July “marked one of the sharpest hedge fund de-grossing episodes of the past decade,” Goldman said:
- Hedge funds diversified away from AI stocks in July:
Hedge funds struggled to a historic extent as AI momentum unwound in July, according to Goldman Sachs:
“Our Hedge Fund VIP list of the most popular long positions suffered its worst 1-month underperformance vs. the S&P 500 in more than 20 years of history, and July marked one of the sharpest hedge fund de-grossing episodes of the past decade,” Goldman strategists said:
Hedge funds have begun to diversify from artificial intelligence, even after they entered last quarter “all in on AI” with portfolio turnover at the highest since 2021:
“Hedge fund performance, leverage, and the most popular long positions have swung sharply with the AI trade during the last few months,” Goldman said:
Hedge funds delivered strong gains in the second quarter as the market was being fueled by popular AI stocks, which helped hedge fund crowding climb to a record:
That said, while hedge fund gross leverage, net leverage, and AI exposure have each declined from their Q2 highs, they still rank above longer-term averages:
“Despite the volatility, US equity long/short hedge funds have returned 10% through mid-August.”
